The Federal Government has announced a regulatory review into the controversial payday lending sector.
In a statement released on Friday, assistant treasurer Josh Frydenberg said that the government recognises the value of payday lenders; however, they want to ensure that vulnerable borrowers are protected.
“The Government recognises that small amount lenders can play an important role in the economy by providing credit to consumers who are excluded from mainstream forms of finance,” he said.
“The Government wants to ensure that the regulatory framework strikes the right balance by protecting vulnerable consumers without imposing an undue regulatory burden on industry.”
The review will be chaired by Danielle Press, the CEO of Equipsuper, who will be joined by panel members Catherine Walter AM, deputy chair of Funds Management Victoria, and Stephen Cavanagh, partner at HWL Ebsworth.
Speaking to ABC's AM program, Frydenberg agreed that the payday lending sector suffers an image problem.
“There are certainly cases where people have been irresponsible with their lending but there are also some restrictions but we want to look at the overall regulatory framework here,” he said.
This announcement comes just after Westpac confirmed it will no longer provide funding to the payday lending sector.
An ASIC review of payday lending, released earlier this year, claimed payday lenders need to improve their compliance with key consumer protection laws. The review found that payday lenders were “falling short” of meeting lending obligations.
Payday lending refers to loans that are generally of less than $2,000 with a maximum term of 12 months.