Video transcript:

Payday loans are small amount loans, less than $2000 and are short term – less than a year.

They’ve typically been accessed by people who are experiencing financial difficulties who might need short-term cash to pay, for example, an electricity bill or to cover their rent.

There are new laws covering the payday lending sector designed to protect people who are in these sorts of financially-challenged situations and these include laws that put a cap on the amount of fees and charges that people have to pay and that also seek to ensure that people don’t end up in a debt spiral where they take out one loan to pay back the previous loan.

ASIC has just released a report that sets out our review of almost 290 payday loans and we found that the compliance with the new laws certainly needs to improve.

We found areas where there are substantial concerns. For example, the suitability tests where people already have several existing payday loans or where they’re in default under a payday loan.

And it’s a message for industry now – a guide for industry in a way - about where they need to lift their standards and what they need to focus on to ensure that they can comply more effectively with the law.

ASIC is taking a range of enforcement actions to lift compliance in the payday lending sector, demonstrating that we are prepared to crackdown where we see non-compliance, we’re prepared to crackdown where we see vulnerable consumers paying too much.

We have seven court cases underway and we’ve recently had The Cash Store decision where the court handed down a penalty of almost $19 million against a payday lender for inappropriate lending.

We’re also engaging with the industry through reports such as this payday lending review which set out those areas where the industry should be focusing its efforts, where it should be lifting its compliance so that they can ensure that consumers, many of whom are financially vulnerable, are not paying more than they should.

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