Government brings forward high-cost loan protections
Published: 30 April 2020
The Government is bringing forward measures to protect people in financial hardship from high-cost loans that trap them in debt.
Changes under the Credit Contracts Legislation Amendment Act to strengthen protections for vulnerable borrowers were due to start on 1 June 2020. However, the Government is bringing forward the introduction of some measures due to the impacts of COVID-19.
These measures are part of the COVID-19 Response (Taxation and other Regulatory Urgent Measures) Bill and will apply the day after the legislation receives Royal Assent.
The improved protections mean that:
- people borrowing from high-cost lenders will never have to pay back more than 100 per cent of the loan principal,
- compound interest on high-cost loans will be banned, and
- fees for defaulting payments will be limited to $30 (unless the lender can show that the higher amount reflects their costs).
The Government is aiming to have other consumer credit reforms, including new affordability regulations and new requirements for lenders to meet fit and proper person thresholds, in place from 1 October 2021.
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