Short-term lenders may be required to register all their loans in a public database, so that other small amount lenders can check the loan outstandings of credit applicants.The proposal is set out in a consultation paper (CP 198) issued by the Australian Securities and Investments Commission on Friday. The paper, Review of the Effectiveness of an Online Database for Small Amount Lenders, looks at whether an online database would be of assistance in determining whether consumers applying for small amount loans (such as payday loans) already have outstanding debtsThe National Credit Act was amended last September (with effect from March 1) to establish a presumption that a small amount credit contract will be unsuitable if the consumer is already a debtor under another small amount credit contract.Despite the introduction of the responsible lending provisions of the National Credit Act, the Government was concerned about the repeated use of small amount credit contracts, particularly the risk of consumers falling into a debt spiral (for example, using a new loan to pay out an old one).Under the September amendment, a small amount credit contract would also be unsuitable if the consumer was in default on a credit contract or if, in the 90-day period before the time of the credit assessment, the consumer had been a debtor under two or more small amount credit contracts.Lenders and their credit representatives must ascertain details of a consumer's recent and existing small amount loans to assess whether the presumption of unsuitability has been triggered. ASIC is asking the industry and consumers whether a database would assist lenders to determine whether loan applicants already have small amount loan outstandings.Some, but not all small amount lenders access credit reporting agency reports. ASIC's view is that use of a credit reporting agency is unlikely to assist the lender to ascertain whether the presumption of unsuitability is triggered."Even when a credit report is obtained it may not list all the small amount loans that a consumer has entered into," ASIC said.ASIC is calling for comments by February 21. Among the questions it poses in the paper, it wants to know whether it should be mandatory for credit licensees to register small amount loans in a database and also mandatory that they make an inquiry before lending. It also wants to know what information should be recordedWhen ASIC reviewed the small amount lending industry in 2010 it found that lenders had introduced new procedures to meet their responsible lending obligations but they were failing to comply with requirements consistently.Problems included lenders not recording the purpose of the loan, undertaking very limited verification of the borrower's financial circumstances and not taking steps to clarify conflicting information on loan applications.