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.