Government Announces "Crackdown" on Payday Loans and Predatory Lending
In October of 2022 the Albanese government announced a "crackdown" on payday lenders. A senate economics legislation committee was scheduled for Australians to report harms they'd suffered from payday lenders and for consumer advocates to provide consultation on future legislation.
A coalition of interested group, headed by the Consumer Action Law Centre, expressed in a submission to the committee that "irresponsible lending was rife in the sector," and that payday lenders frequently made "ludicrous and completely unrealistic estimates of a person’s expenditure."
Assistant Treasurer and Minister for Financial Services, Stephen Jones, criticised the former government lack of action on reviewing the payday lending sector:
“Our objective is to get those reforms passed...More than ever with interest rates rising, inflation on the rise, we want to ensure that vulnerable consumers are protected...The previous government had nine years to reform the sector. We want to do it in our first nine months.”
Reform for the laws involving small-account credit contracts was originally proposed in 2016 by a review initiated by the Turnbull government. Despite then-Minister for Financial Services, Kelly O'Dwyer, accepting most of the reviews recommendations and draft legislation being produced by Treasury in 2017, the new reforms did not progress through parliament. The legislation introduced was coupled with laws which would have minimised responsible lending rules for banks, which lead to Labor opposing the bill overall. Mr. Jones stated that Ms. O'Dwyer was "kneecapped by her own party."
The government is also investigating new regulation for Buy-Now-Pay-Later (BNPL) financial products. In February ASIC provided a submission to a Treasury consultation stating that they were in support of regulating BNPL providers, such as Afterpay and Zip, under both the National Credit Act and the national credit code. This would place such providers under the same regulation as other Australian credit products. Buy-Now-Pay-Later providers are currently managed self-regulated under a voluntary code.
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