Who is NCPA?

ANSWER: The National Credit Providers Association (NCPA) is a not for profit organisation that represents its members who are Small Amount Credit Contract providers. NCPA, at all times, advocates for responsible lending amongst its members.

What are payday loans?

ANSWER: Payday loans no longer exist and have been illegal since the government banned them in March 2013.

How long do SACCs take to pay back?

ANSWER: A Small Amount Credit Contract can be paid back from anywhere between 16 days and one year and the customer decides on the timeframe.

What happens if the customer can’t pay back their loan? Are they ‘sucked into’ a debt spiral?

ANSWER: No. Small Amount Credit Contracts are government created and regulated products. There are many processes and rules in place to protect the consumer from becoming over committed. For instance, responsible lenders, such as NCPA members, will take steps to confirm you can afford the loan and you have sufficient disposable income, to firstly pay back your loan, and secondly, afford to live. Furthermore, you cannot be charged more than the amount of your original loan in fees and charges. For example, if you borrow $100, you will never pay back any more than $200 (including all fees) on that loan. This is not the case for other financial products on the market.

Don’t Small Amount Credit Contracts have a high annual percentage interest rate (APR), which is higher than credit cards and other loans on the market?

ANSWER: APR’s or Annual Percentage Rate have never indicated the cost of a loan that does not run for at least 1 year. $100 borrowed today and repaid the next day with a $1 fee, is an APR of 365%. The repayments on SACCs are not calculated on a percentage interest rate – they are repaid based on a simple government-capped fee structure consumers can understand. An establishment fee can be no greater than 20% of the original loan amount, with a monthly fee which can be no more than 4% of the loan amount per month if the loan is paid out in the time agreed with the borrower. There may be default fees, and government fees, but borrowers can never be charged more than the amount of the original loan in fees which means they will never be required to pay back more than double the amount of the original loan in total. For example, for a loan of $500, total repayments would be capped at $1,000 which stops debt-spiral traps. Therefore, the APR on Small Amount Credit Contracts only seems high because they are not taken out for long periods of time. A simple comparison would be a hotel that charges $200 a night. This rate is not advertised as $73,000 per year, because you only use them for short stays. The same applies for Small Amount Credit Contracts.

If Small Amount Credit Contracts are legitimate products then why are there so many class actions/lawsuits?

ANSWER: Many of the class actions today are from issues that existed before March 2013, which is when the new legislation on Small Amount Credit Contracts was put in place. Despite the media attention, there has only been 2 or 3 actions out of millions of loans, of which none related to Small Amount Credit Contacts. The media tend to pick up on stories like these because they sound sensational but they are referring to old problems and not current consumer experiences.

Why don’t people choose traditional sources of credit from banks?

ANSWER: Some people can’t get credit from banks, perhaps because they don’t earn enough or have a bad credit rating. Other people don’t want to deal with banks or use credit cards. Financial counsellors report that people with credit card debt are the most common complaints they see regarding financial problems. Unfortunately, there are a staggering number of people in Australia who simply don’t qualify for credit from banks and they are normal, mostly working people who have financial needs such as car registration, school fees and unexpected bills to pay. They still need quick access to funds and this is where Small Amount Credit Contracts help.

What would happen if Small Amount Credit Contracts were made illegal?

ANSWER: The government cannot legislate demand. There would be around a million Australians a year who would be unable to access credit to fund day-to-day or unexpected expenses that allow their lives to function. It would also lead to an increase in activity in the black market, which could put people’s lives in jeopardy.

Why do we have these small loans?

ANSWER: The Small Amount Credit Contract and all of its consumer protection mechanisms were introduced by the government to help bridge the gap for those who can’t access credit through traditional avenues, like banks, but still need access to a legitimate and safe source of credit, which is provided by ASIC licensed lenders, for unexpected expenses.