SA introduces payday lending reform bill

The South Australian government has announced that it will legislate to increase protection for consumers taking out small amount credit contracts, calling out the Australian government for failing to take action on the issue.

South Australian Attorney-General Vickie Chapman said in a statement that the SA government was initiating reform in this area because the Australian government had failed to act. It has tabled a draft bill and called for feedback.

In 2017, the Australian government released a draft bill for consultation, in response to recommendations of the Independent Review of Small Amount Credit Contract Laws, which said there needed to be a tougher approach to SACCs and consumer leases.

After releasing the draft the government went cold on the reform, which most commentators say was a response to industry lobbying.

The SA bill is along similar lines to the Australian government’s 2017 draft.

It caps the proportion of income that consumers can commit to repaying small amount credit contracts and consumer leases.

It requires small amount credit contracts to have equal repayments and equal payment intervals.

It removes the ability of SACC providers to charge monthly fees in respect of the residual term of a loan or charge early termination fees where a consumer repays the loan early.

It bans 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.

One significant difference between the SA and Commonwealth bills is that the Commonwealth bill includes anti-avoidance provisions, which are not in the SA bill.

Chapman said: “In the absence of a stronger national regulatory framework, it is essential action is taken at a local level to ensure South Australians are protected from predatory practices.”

Consumer groups have welcomed the SA government’s move and called on other state governments to follow its lead.

One potential concern is that consumer credit law could return to state-based jurisdiction, which was the case before the introduction of the National Consumer Credit Protection Act in 2010.

A policy officer at Consumer Action Law Centre, Tom Abourizk, said such a risk was low.

Abourizk said: “The South Australian law is drafted to make it clear that it is designed to work in conjunction with the Commonwealth law. It does not take consumer credit law in any new directions, except that it would deliver the key recommendations the Federal government accepted from its own review into these laws nearly four years ago.”

The South Australian government is not alone is trying to get the Australian government to go ahead with the reforms. Last December, Centre Alliance Senator Stirling Griff introduced a private member’s bill, 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.

That bill was referred to the Senate Economics Legislation Committee for review and a report is due later this month.