Government Responds to the Small Amount Credit Contracts Independent Review Panel Recommendations

On 28 November 2016 the Federal Government released its response to the independent review of the small amount credit contract laws in Australia.

Small amount credit contracts (SACCs), also known as payday loans, are small amounts of money loaned to borrowers at very high rates. They were originally designed so that borrowers could pay back the loan after they received their next wages or Centrelink payment. SACCs are for less than $2000 and are to be repaid over a term of between 16 days and 1 year. For more information about the fees that can be charged for SACCs see our advice page on Payday Loans.

In June 2016 CCLSWA provided submissions to the Small Amount Credit Contracts (SACC) Independent Review Panel Recommendations on the Final Report released on 3 March 2016. You can read CCLSWA’s full submission here.

The Government’s response supports:

  1. retaining the existing price caps on SACCs;
  2. extending the SACC protected earnings amount requirement to all consumers and lowering it to 10 per cent of the consumer’s net income, while introducing a similar earnings requirement for consumer lease providers;
  3. introducing a cap on total payments on consumer leases; and
  4. banning unsolicited offers of payday loans and door to door sales for consume lease (rent to buy) products.

The then Minister for Revenue and Financial Services, the Hon Kelly O’Dwyer MP, said, “[i]mplementation of these recommendations will ensure that vulnerable consumers are afforded appropriate levels of consumer protection while continuing to access SACCs and leases.”

These changes will apply 12 months following the proposed legislation passing through Parliament.

You can read the media release in full here.

In response to the Government’s announcement of its support of the recommendations, the Consumer Household Equipment Rental Providers Association (CHERPA) released a statement which claims that 380 small businesses will have to close if the recommendations are enacted. CHERPA claims that this will see up to 1500 jobs lost in the industry.

CCLSWA’s casework experience suggests that the existing SACC laws have failed to be effective in curbing the growth of the payday lending industry and the frequency of consumers experiencing debt spirals. CCLSWA considers that any steps taken to improve financial inclusion and protection for the most vulnerable members of our community are positive ones.

If you require advice amount payday loans or consumer leases, please call our telephone advice line on (08) 9221 7066 for a free, confidential discussion. Our advice line is open Monday to Friday from 9am to 4pm.