Last week, the Minister for Superannuation and Corporate Law, Nick Sherry released a draft of the new legislation designed to increase responsible lending to Australian consumers.
What does it all actually mean for customers?
Well, firstly, lenders have to be licensed by ASIC and to get a licence, they need to observe ?responsible lending? guidelines. This should give you extra peace of mind, as only lenders who ARE doing a good job will be licensed, reducing the risk of the unknown. Unlicensed lenders will, by definition, be criminal – so avoid them!
Lenders will give you lots more information up front, allowing you make a truly informed decision and there’ll be none of those hidden fees and charges. Also, if you’re not happy with the loan, all loan companies will have to be a member of an External Dispute Resolution Scheme to help sort out any disagreements.
You’ll need to provide lenders with slightly more information than you do now before getting a loan – including why you want the loan; any other credit you have; and if you are aware that credit is going to change (for example, if you have a loan which is payment free for 6 months, you’ll have to tell them when you are going to start paying and how much it’ll be). That may sound a pain but it is being done to make sure that – from the variety of products there are – you’re getting the right one. You don’t need me to tell you that you shouldn’t use your payday loan to pay off your interest free sofa but some companies do try to get you to do just that! Not anymore.
It looks like you’ll probably be credit checked whenever you first apply for credit – no matter which lender you use. This isn’t a bad thing though as, if you are having problems, it’ll help companies recognise this and allow them to act quicker to stop things getting worse.
All in all, the proposed laws are great for Australian consumers and for the industry too. At Cash Doctors, we’ve always believed in responsible lending and the new rules are largely those we have in place already.
Companies will have to:
- Credit check customers (we do!)
- Verify income through independent means (payroll calls or bank slips – we do!)
- Be the member of an External Dispute Resolution Scheme (we were the first payday loan company to join one voluntarily)
- Find out why the customer wants to borrow (ok, we don’t do this – due to the short term nature of our loans, we didn’t always think it was our business but we’re more than happy to do it)
- Be transparent about fees, charges and interest (done)
- Provide a credit guide with details of the lender and the customer’s rights (we’ve no problem with that but it does mean a bit more paperwork for you to read)
Anyway, that’s my quick overview – there’ll be lots of updates over the next couple of months, I’m sure!
I hope you found this useful..
