Regulating the cost of small loans : overdue or overkill?
Small-amount short-term lending began in 1994 in response to the initial exemption of such loans from consumer credit regulation. Growing demand for such loans now produces industry turnover of approximately $800 million each year. Regulators recognised early the need for consumer protection due to the vulnerability of borrowers and the emergence of various predatory practices. This led to reforms designed to regulate these loans, prevent particular misconduct and provide remedies against injustice. Some were enacted as part of the National Consumer Credit Protection Act 2009 (Cth), which also imposed licensing and responsible lending requirements on lenders and increased consumer access to remedies. The Government has now introduced the Consumer Credit and Corporations Amendment (Enhancements) Bill 2011 which limits the price that can be charged for credit and restricts access to small loans. This article examines the extensive reforms which have taken place in this sector, and compares these regulatory approaches with the “bright line approach” of the Enhancements Bill. The article argues that the repercussions of this step will require careful monitoring to ensure that further harm is not suffered by those least able to bear it, and that the government will also need to facilitate other, more sustainable, solutions to the problem that small loans are currently used to solve. After we wrote this article, the Report of the Parliamentary Joint Committee on Corporations and Financial Services and the Report of the Senate Economics Legislation Committee on the Enhancements Bill were released. These are referred to in a postscript.
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|Item Type:||Journal Article|
|Keywords:||consumer credit, payday lending , National Consumer Credit Protection Act 2009 (Cth), Consumer Credit and Corporations Amendment(Enhancements) Bill 2011 (Cth)|
|Subjects:||Australian and New Zealand Standard Research Classification > LAW AND LEGAL STUDIES (180000)|
|Divisions:||Current > QUT Faculties and Divisions > Faculty of Law|
Current > Research Centres > Law and Justice Research Centre
Current > Schools > School of Justice
Current > Schools > School of Law
|Copyright Owner:||Copyright 2012 Lawbook Co|
|Deposited On:||23 May 2012 10:04|
|Last Modified:||29 Sep 2012 08:55|
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