Credit (Commonwealth Powers) Bill

This speech is in relation to the Credit (Commonwealth Powers) Bill and includes the Hon. J.M.A. LENSINK directing a question regarding fringe lending to the Hon. G.E. GAGO.

The Hon. J.M.A. LENSINK: I am grateful to the minister and her officers for providing me with a briefing on these bills. One of the questions I asked was in relation to payday lending, a topic that has come up over the years. I think that when the Hon. Jennifer Rankine was consumer affairs minister there were some proposals at that stage and various members have had private members' bills drafted to address this issue. I asked the officers what has happened to payday lending. Can the minister place on the record the situation and also advise on phase 2, which will include fringe lending?

The Hon. G.E. GAGO: The answer to the question about payday lenders is that they are generally included. The credit code was amended in 2001 to capture fringe lending. Whereas previously short-term loans for less than 62 days were exempt from the application of the code, loans of under 62 days are now caught by the code where the annual interest rate of the loan exceeds 24 per cent and the fees charged for the loan exceed 5 per cent of the loan amount. The minimum loan amount caught by the code was also decreased from $200 to $50.

As is currently the case under the Uniform Consumer Credit Code, the national code does not apply to the provisions of credit if, under the contract, these three things all apply: the provision of credit is limited to a total period that does not exceed 62 days; and the maximum amount of credit fees and charges that may be imposed or provided for does not exceed 5 per cent of the amount of the credit; and the maximum amount of interest charges that may be imposed or provided for does not exceed the amount calculated as if the code applied to the contract equal to the amount payable if the annual percentage rate was 24 per cent per annum.

It is also important to note that the commonwealth will, as part of phase 2 of the credit reforms, consider the need for further changes to the law to address fringe lending issues. It is expected that the commonwealth government will soon release a green paper on short-term small amount lending, and this will provide an opportunity for consultation and consideration of the need for amendments to short-term exemption provisions.
 
Payday lenders are generally captured by this, with all those technicalities. Basically, there are exemptions to some very short-term lenders. As to those that are currently exempt, those exemptions have been transposed, so there has been no change to those very short-term lenders.