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Micro-lending News & Opinion
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| Government
Response to the Report of the Consumer Credit Review |
| by Consumer Affairs Victoria,
September 2006 |
The
Consumer Credit Review comes at a critical time. First,
products and providers in
the consumer credit market are progressively becoming more
complex and diverse.
Second, the amount of personal and household debt held by
Australians has never
been higher. In Victoria, in any given year as many as 1.3
million people are liable to
experience financial stress. Third, the current State and
Territory administered
Consumer Credit Code has remained largely unchanged since
it was finalised in 1994,
whilst there has been extensive change to other financial
regulation. Fourth, State and
Territory Governments have concentrated on implementing
the recommendations of
reviews conducted between 1998 and 2000, with little opportunity
to strategically
assess the market, the consumer problems that arise, and
the likely future direction of
consumer credit.
The Report of the Consumer Credit Review (the Report) demonstrates
that consumer
credit regulation is not operating as effectively as it
could. Loopholes and gaps have
emerged because credit products have been introduced that
were not envisaged when
the current regulation was developed and products that had
a relatively small market
share have become more prominent. The resolution of some
systemic issues has been
either delayed or partial, however the risks to consumers
are increasing as they take
on more debt and deficiencies in regulatory protection expand.
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| Payday
Holiday: How Households Fare after Payday Credit Bans |
by Donald P. Morgan Michael
R. Strain, Federal Reserve Bank Of New York,
November 2007 |
Payday
loans are widely condemned as a “predatory debt trap.”
We test that claim by
researching how households in Georgia and North Carolina
have fared since those states
banned payday loans in May 2004 and December 2005. Compared
with households in all
other states, households in Georgia have bounced more checks,
complained more to the
Federal Trade Commission about lenders and debt collectors,
and filed for Chapter 7
bankruptcy protection at a higher rate. North Carolina households
have fared about
the same. This negative correlation—reduced payday
credit supply, increased credit
problems—contradicts the debt trap critique of payday
lending, but is consistent with the
hypothesis that payday credit is preferable to substitutes
such as the bounced-check
“protection” sold by credit unions and banks or
loans from pawnshops.
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| Calculating
Annual Percentage Rates and Comparison Rates |
by Geoff Morley, Bendzulla
Actuarial PTY LTD
December 2007 |
This
document discusses the background, implications and limitations
of the current and proposed methods for calculating Annual
Percentage Rates and Comparison Rates.
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| Payday
Lending and Public Policy: What Elected Officials Should
Know |
Tom Lehman, Ph.D. Associate
Professor of Economics Indiana Wesleyan University
August 2006 |
The
emerging payday loan industry is one of the fastest growing
segments in the broader consumer financial services market.
One estimate suggests that the number of payday loan offices
nationwide increased from roughly 300 in 1992 to nearly
10,000 by 2001 (Brown, Findlay, Lehman, Maloney and Meehan,
2004). The Community Financial Services Association of America
(CFSA), a trade group representing the payday loan industry,
currently reports on its website (www.cfsa.net) that there
are over 15,000 payday advance locations nationwide extending
roughly $25 billion in short-term credit annually.
In Indiana, trends appear to mirror the nationwide growth
in this industry. According to the Indiana Department of
Financial Institutions (2006), there are a total of 606
licensed payday loan locations in the state. Of those, just
30, or less than 5 percent, were licensed and operational
before 1996, an over twenty-fold increase in payday loan
storefront locations in the last decade. In my city of Marion,
Indiana, the DFI report identifies at least seven payday
loan firms operating nine different storefront locations.
Four of those locations, or roughly half of the shops in
the city, have been operational only since 2004. Only one
location was in operation prior to 1996. Clearly, the demand
for short-term credit is booming, and cash advance firms
have responded rapidly to meet this market demand.
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| Comment
On Proposed Consumer Credit Code Amendment Bill 2007 |
Phillip
Smiles, Lyn Turner
September 2007 |
In
2004, an ANZ Bank survey established that 18% of all adult
Australians had a personal loan. The Federation’s members
provide personal loans to a portion of that 18%. Significantly,
within that portion, 88% of the borrowers do not have access
to the ANZ, or any other banks, for such personal loans.
Over the last decade, this segment of the lending market
has been abandoned by all the banks and other mainstream
lenders, because these institutions can make much greater
profits, with less risk, concentrating on lending to the
big end of town, providing extensive credit card services
and home loans with terms over many years.
The Federation believes the impact of the regulatory regime
proposed should not be underestimated. The Amendment Bill
and Regulation incorporate significant changes that will
impact on many aspects of the day to day conduct of the
microlending sector of the Australian finance industry.
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| Payday
Loan Customer Survey - British Columbia |
| by Pollara, October 2007
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The Canadian Payday Loan Association (CPLA) commissioned
POLLARA to conduct a telephone survey of payday loan customers
in British Columbia to develop an understanding of payday
loan customers’ perceptions of the payday loan industry.
The CPLA represents 23 companies with 501 retail financial
services outlets across Canada. Member companies service
nearly 2 million Canadians a year by providing short term
loans in small amounts to help cover unanticipated expenses.
Lists of payday loan customers were provided by CPLA members.
In total, 8,252 usable records were provided for this study.
POLLARA conducted a total of 400 telephone interviews with
payday loan customers in British Columbia between August
14th and September 19th, 2007, resulting in an overall margin
of error of plus or minus 4.9%, nineteen times out of twenty.
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| Proposal
To The Minister Of Fair Trading |
Rob Legat
(President NFSF QLD) Phil Johns (Vice President NFSF QLD),
October 2007 |
In
response to a request by the Minister to provide a proposal
for an effective and workable regulatory regime for Queensland
microlenders.
As the Minister will recall, this proposal is presented
in accordance with the Minister’s request, during the
ministerial meeting with a delegation from the National
Council of the National Financial Services Federation (NFSF)
on Thursday October 18th, 2007.
The proposal is designed to present an appropriate structure
of regulation, which will balance consumer protection with
the continuation of a viable and legitimate Queensland microlending
industry.
It is hoped that the Minister and his Cabinet colleagues
will have the opportunity to closely examine the contents
of this proposal and that there will be an opportunity for
the ALP Parliamentary Caucus to consider it, as part of
its forthcoming deliberations on the regulation of microlending
in Queensland.
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| Submission
To The Minister For Fair Trade |
Regarding
Consumer Credit (Queensland) Amendment Bill 2008 and
Consumer Credit (Queensland) Regulation 2008
The Board of the National Financial Services Federation
(Queensland) Inc.
February 2008 |
The Minister has called for submissions from Queenslanders
on whether the Consumer Credit (Queensland) Amendment Bill
2008 (“Bill”) and Consumer Credit (Queensland)
Regulation 2008 (“Regulation”) meet the policy
objectives of the Queensland Government.
This document comprises the National Financial Services
Federation (Qld) Inc’s (NFSF) submission. |
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| Comment
on Interest Rate Capping Measures for Fringe Lenders |
Haydn Cooper,
Partner Min-it Software
February 2008 |
Minit Software is a specialist software supplier to the
lending industry. We were a finalist in the Queensland Consumer
Protection Awards 2005 and were awarded a Highly Commended
Award in the 2007 Awards. Minit Software promotes compliance
with the Code and other legislation. In order to do this,
we held our first Conference for microlenders in 2006 that
was opened by the Queensland Fair Trading Commissioner.
Last year’s conference was held in May and we take
this opportunity of thanking the Department again for supporting
it. Neither the author nor his business partner has any
financial interest in any lender. Aside from the software
produced inhouse, specifically by or for franchised organisations,
Minit
Software is the industry leader in the Australian market.
It has current clients in Queensland, New South Wales, Victoria,
South Australia and Tasmania and will shortly have our first
client commence in Western Australia operating.
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