Consumer advocates have called for the inclusion of a general anti-avoidance provision in the consumer credit law, arguing that it is only way to put an end to the long history of avoidance by fringe lenders.The Consumer Action Law Centre and the Consumer Credit Legal Centre recommended the change in a submission to a Treasury consultation paper outlining tougher regulations for payday lenders.Under rules introduced last year, payday lenders must limit their interest rates and charges where a finance contract is worth up to A$2000 and runs for less than two years. There is a limit of 20 per cent on any upfront charge and a limit of four per cent on monthly charges.For larger loans, a credit provider is prohibited from entering into a contract where the annual "cost rate" exceeded 48 per cent.The Treasury consultation paper, which was released last month, reported avoidance had increased since the caps were introduced. Avoidance activities included blurring the distinction between smaller and larger loans, operating outside the licensing regime, and using a related brokerage to impose charges that were not counted in the cap.The draft regulations clarify the boundary between small amount and medium amount credit contracts to ensure that the small amount lending cap applies to contracts where the borrower receives a maximum amount of $2000 in their hands, with fees and charges allowed to be additional.The regulations close several loopholes that exempt certain types of low-cost contracts from the National Credit Code.The regulations also address an avoidance practice where credit providers establish a brokerage arm to their business. The broker then arranges credit with the credit provider and charges the borrower brokerage fees that are not included in the calculation of the cost cap.The consumer submission supported these changes, although it called for some fine-tuning with a couple of them."In addition to the regulations proposed, the government should consider including a general anti-avoidance provision in the national credit laws," the consumer submission said."A general anti-avoidance provision would be designed to allow the Australian Securities and Investments Commission to take enforcement action if it detected a scheme…that was designed to avoid the operation of the Credit Code," it said."The benefit of this approach is that it enables courts and regulators to identify and react to avoidance schemes before consumer detriment occurs. Currently a consumer, and usually a large number of consumers, must suffer detriment before a complaint can reach courts or regulators."