Association commissions review of small amount loans

by Julia Corderoy28 Jul 2016

The National Credit Providers Association (NCPA) has commissioned a second review of Small Amount Credit Contracts (SACCs) as the peak body for the small amount lending industry is concerned the industry is still being misunderstood and targeted.

The review will cover the financial period from July 2015 to June 2016 and will follow the first review, also commissioned by the NCPA, conducted in October last year and covered the two-year period from July 2013 to June 2015. According to the NCPA, this was the most comprehensive statistical review of SACCs, consumers, and ASIC licensed providers ever undertaken in Australia.

The NCPA hopes the findings from this next wave of research will provide a deeper understanding of how small loans are used and the success of small loans as a financial product, particularly for those who are not able to access traditional forms of credit from the banks.

Findings from the first review found 1.3 million SACCs were entered into over the two-year review period, with the average loan amount being $502 and the average time taken to repay the loans being 117 days. The average borrower was a 37-year-old male. 

The CEO of the NCPA, Phil Johns, said he remains concerned that while the review of SACCs showed that nine out of 10 small loan repayments are successfully met, the industry is still being targeted by some groups intent on shutting the industry down.

“It is highly important for the whole industry that we have up-to-date data, so not only can we demonstrate the need for small loans, but also combat the ignorance in the community about the role SACCs play,” Johns said.

“The new research will seek to demonstrate the highly compliant nature of the small loans product. It’s not just those who can’t or don’t want to access credit from traditional sources that use SACCs, it’s also those on higher incomes who want to access a loan quickly and out of working hours.

“A SACC has the highest level of consumer protection of any personal loan on the market and NCPA believes consumers need be aware of the responsible lending obligations lenders must go through. Despite some negative media small loans may receive, NCPA hopes the new data will help to educate individuals, the media, government, the banks and the wider credit industry about the differences between SACCs and illegal payday loans.”

SACCs are a small loans of up to $2,000 repaid between sixteen days and one year. Since 1 July 2013, fees charged on small amount loans have been capped by the government. The caps include a one-off establishment fee of not more than 20% of the loan amount and a monthly account keeping fee of not more than 4% of the loan amount.

The review commissioned by the NCPA will be undertaken by financial services research firm, CoreData. CoreData also undertook the first review commissioned by the NCPA.