Small Loans, Big Need is an industry-led initiative designed to provide the real facts about the small amount loans industry in Australia.

Today’s small amount loans industry is heavily regulated by the federal government, and it serves a purpose with a very big need.

Did you know that approximately 3 million Australians – around 16.9% of the adult population – are either fully or severely excluded from obtaining credit from the banks?* That means it’s very difficult to access credit cards, personal loans, car loans and mortgages. With household budgets that are already stretched, an unexpected expense – like a medical bill, vet bill, car repairs, or a school excursion for the children – can often leave these people with nowhere to turn.

In the past, they would often feel they had no choice but to take out what used to be called a “payday loan” – where they obtained a small loan at a high rate of interest, which was generally paid back in full (and then some) on their next payday. In March 2013, this practice was abolished by the federal government, and with this new legislation, “payday lending” as a concept, became invalid and illegal.

In its place, a positive industry developed, dedicated to responsible lending practices, and closing the gap in the market to allow all Australians who are in financial need, to access legitimate small amounts of credit with consumer protection.

This, however, did not stop the negative media reports, which in turn had a negative impact on the reputation of legitimate small loan providers. The term “payday loan” did not become defunct, as it should have when referring to the activities of fully licensed Australian lenders, with the result that the small loan industry still receives unfair criticism in the media to this day. And so there exists an overt mistrust of these products, based on very little understanding of what a Small Amount Credit Contract truly is, and how the products work.

The Australian Government recognises the role reputable small amount lenders play in the Australian economy where lenders provide credit to consumers who are excluded from mainstream forms of finance. In August 2015, a government-mandated review of small amount loans was ordered by the Federal Assistant Treasurer. The review will examine and report on the effectiveness of the laws relating to small loans, as well as consumer leases, and will consider critical issues for long term industry viability such as competition, fairness, innovation, efficiency, regulatory compliance costs and industry viability. It is designed to ensure that regulations strike the right balance by protecting vulnerable consumers without imposing an undue regulatory burden on this vital industry.

The review will be headed up by Assistant Treasurer Hon Kelly O’Dwyer MP (formally Minister Josh Frydenberg MP), to examine and report on the effectiveness of the law relating to this government-created and highly regulated finance product.

Small Loans, Big Need, is an industry-led response to this review, as we seek to start an open and honest discussion about small loans, so that all Australians can understand the true nature of small loans, and the big need that exists for them.