The Federal Government has released a discussion paper on high cost, small amount loans, commonly referred to as ‘payday loans’.

 

Minister for Financial Services and Superannuation said that the paper was a response to the concerns raised by consumer groups, industry and consumers.

 

"Payday lending can be high risk for vulnerable or low-income consumers. People often borrow money from payday lenders in order to meet short-term commitments like rent and groceries. The interest charged on the loan is often so exorbitant it only worsens the financial position of the consumer in the long-term, who may need to take out further loans in order to pay off the original loan and the interest," Mr Shorten said.

 

"This Government acknowledges that there is no quick fix to problems related to payday lending. As such, we fund a range of programs which help consumers address their financial issues before they resort to payday loans."

 

The paper outlines three major goals that Government has identified:

  • reduce the need for high cost, short term, small amount credit by improving access to low-cost and/or fairer alternative assistance;
  • encourage more alternatives to high cost, short term, small amount lending; and
  • improve assistance to those in a debt cycle so they are provided with constructive long-term solutions.

 

The discussion paper can be found here

 

The deadline for submissions is June 4.