Progress in payday credit reform or a 25-year setback in credit regulation? Vickie Chapman, Attorney General of South Australia
The government of South Australia has announced that it will legislate to strengthen the protection of consumers taking out low-value credit contracts, calling on the Australian government for not taking action on the issue.
South Australia’s Attorney General Vickie Chapman said in a statement that the South African government was initiating reform in this area because the Australian government had failed to act. He tabled a draft bill and asked for comments.
In 2017, the Australian government released draft legislation for consultation, responding to recommendations from the Independent Review of Small Amount Credit Contract Laws, which said a stricter approach to SACCs and consumer leases was needed. .
After publishing the draft, the government remained cold on the reform, which most commentators believed was a response to industry lobbying.
The SA bill is similar to the Australian government’s 2017 bill.
It caps the proportion of income that consumers can commit to repaying low-value credit contracts and consumer leases.
It requires that small amount credit contracts have equal repayments and equal payment intervals.
It removes the ability for SACC providers to charge a monthly fee for the remaining term of a loan or to charge an early termination fee when a consumer prepays the loan.
It prohibits unsolicited advertising and door-to-door selling by payday lenders and lessors. Consumer leases must disclose the base price of the good, as well as the difference between the base price and total repayments.
A significant difference between the SA and Commonwealth bills is that the Commonwealth Bill includes anti-avoidance provisions, which are not found in the SA Bill.
Chapman said: “In the absence of a stronger national regulatory framework, it is essential that action be taken at the local level to ensure that South Australians are protected from predatory practices.”
Consumer groups hailed the South African government’s move and called on other state governments to follow suit.
One potential concern is that consumer credit law could return to state jurisdiction, which was the case before the national consumer credit protection law was introduced in 2010.
Consumer Action Law Center policy official Tom Abourizk said such a risk was low.
Abourizk said: “South Australia’s law is drafted to make it clear that it is designed to work in conjunction with Commonwealth law. It doesn’t take the consumer credit law in new directions except that it would provide the key recommendations the federal government accepted from its own review of those laws almost four years ago. “
The South Australian government is not alone in trying to get the Australian government to move forward with the reforms. Last December, Alliance Center Senator Stirling Griff introduced a private member’s bill, the National Consumer Credit Amendment (Small Amount Credit Contract and Consumer Lease Reforms) Bill 2019.
The bill, which was co-sponsored by Labor Senator Jenny McAllister, is a “mirror” of the government’s 2017 draft and was designed to put the issue back on the agenda.
This bill has been referred to the Senate Economic Legislation Committee for review and a report is expected later this month.