Government releases payday lending draft legislation

The Minister for Financial Services, The Hon. Bill Shorten MP, released proposals to reform payday lending in August 2011.

The key proposal is that lenders will be limited to charging an upfront fee of 10% of the loan plus a monthly fee of 2% of the balance outstanding.

Lenders will also be prohibited from refinancing short term loans . This is designed to end the spiral of debt faced by many consumers.

The legislation will also require lenders to advise consumers of other options, for example by including a link from their web site to the ASIC MoneySmart web site.

For more see

Consumer group support

While the government has not adopted consumer groups’ preferred approach of a 48% interest rate cap on all consumer loans, consumer groups have broadly welcomed the government proposals. We encourage all community organisations whose members or clients are affected by payday lending to endorse the open letter to Minister Shorten sent recently.

Endorse the open letter to Minister Shorten

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