It has made several amendments to the CCCFA aimed at protecting vulnerable customers
The Select Committee has produced its final report on the Credit Contracts Legislation Amendment Bill, and has made a number of key changes aiming to protect vulnerable consumers from bad debt.
If passed, the Bill would introduce new requirements for assessing the ability of a potential borrower to repay a loan, a cap on high-cost loan fees and interest rates, and new penalties for lenders who do not comply with the requirements.
The new Bill has extended the boundaries of the previously proposed 100% interest rate cap, and has recommended a daily cap of 0.8% on high-cost loans. Default fees would also be limited to $30, or an amount set by regulations.
The definition of “high-cost” has also been reviewed, and any loan with an annual interest rate of over 50% is now considered high-cost. The Bill has also proposed measures to prevent “lender hopping,” or seeking credit from a new lender to repay earlier loans.
Read more: High-cost loans always leave clients worse off – lender
Financial support institution FinCap has welcomed these new protections for borrowers, with chief executive Tim Barnett saying the amendments showed that the Select Committee had listened to feedback, and had undertaken “careful and considered deliberation.”
"Communities and social service providers have been asking for the introduction of an interest rate cap for almost two decades,” Barnett said.
“Now instead of debating whether there should be an interest rate or not, we can work on ensuring that the cap is working and set at the appropriate level to protect consumers from predatory lenders."
"It is pleasing to see that the evidence and stories brought to Parliament’s Committee by Financial Mentors has helped to change the legislation for the better,” he added.
“Financial Mentors witness the harm done to people, families and communities from harmful credit products and predatory lenders. The stories, they told about of control interest rates, the harmful practices of truck shops and persistent advertising of high cost loans had a noticeable impact on Committee members."
