Good Shepherd Microfinance welcomes the opportunity to respond to the interim report of the review of the small amount credit contract laws, and to be able to have an ongoing voice as part of the overall review process.
Read our full submission here.
This review process is vital to improving consumer protection and financial inclusion in Australia, particularly for those on the lowest incomes with the least consumer power and financial choice. We were particularly pleased to see the Panel emphasise the role of regulation in facilitating financial inclusion especially for vulnerable consumers.
We considered each of the observations made by the panel, and has offered our view on each of the options presented.
The key points of this document are:
- More accurate record keeping by lenders will improve ASIC’s ability to enforce new laws.
- Mandatory participation in comprehensive credit reporting will improve compliance and enforcement capabilities.
- Tighter limits for repeat lending will enhance consumer protection and financial inclusion.
- Cost caps (along with improved disclosure requirements and lease length limits), are key to improving affordability and fairness in the consumer lease market.
- The interaction of new consumer lease laws should be carefully considered to ensure financial inclusion and consumer protection are in balance.
In order to enable consumers to access credit that they can afford and to support them onto a path of financial inclusion, it is critical that the Australian Government increases its investment in microfinance initiatives across Australia. The Centre for Social Impact estimates that there is an additional 325,000 consumers who need access to safe, fair and affordable small loans. To meet this significant need, an increase in Federal Government investment from $6 million to $100 million per annum in operational funding would be required. This would also mean an increase in capital $30 million to $500 million, with a broader commitment from other sources.
 Centre for Social Impact, ‘Life Changing Loans at No Interest: An Outcomes Evaluation of Good Shepherd Microfinance’s No Interest Loan Scheme (NILS)’, March 2014