> Consumer advice  > Money Matters  > Payday lending  > What is Payday lending ?

What is Payday lending?

Payday lending is regulated in South Australia under the Consumer Credit Code, which is national legislation regulating consumer credit providers generally. The Credit Code provides important protections for borrowers including requirements for payday lenders to disclose the cost and terms of loans and allowing borrowers to challenge unjust loans in the courts. However, the Government is concerned that these protections do not go far enough in protecting consumers from payday loans and is examining options for further action that could be taken in South Australia, in addition to the national legislation, to protect consumers.

In the meantime there are things that you can do to ensure that you don't get trapped.

Alternative sources of financial assistance

Features of payday lending
These are some of the common features of payday loans:

• loans tend to be for a fixed fee rather than at an interest rate
• loans are usually for a period of 7 to 62 days
• the average amount of a payday loan is $250
• the most common form of repayment is a direct debit arrangement authorised by the borrower
• some payday lenders require security over goods that the borrower owns, e.g. a motor vehicle or furniture
• payday lenders will often roll over loans for a further period for an additional fee resulting in an escalating debt
• payday lenders may charge fees that would be equivalent to very high annual interest rates.

Problems with payday lending
There are widespread community concerns about payday lending. In-depth research summarised the problems as follows:

• Payday lenders may charge high rates with effective interest charges as high as 1300% per annum.
• Payday lenders' clients are generally low-income consumers.
• The rolling over of payday loans leads to a rapidly growing debt that consumers may find difficult to repay.
• Lenders who require direct debit as a form of payment guarantee have priority access to the income of consumers, leaving them exposed to other financial difficulties.

Some payday lenders appear to lend to people who simply do not have the capacity to repay the loan, or not without hardship.OCBA is aware of recent increases in the number of people on Centrelink benefits who are giving direct debit authorities to payday lenders. This would suggest that some people are being left with insufficient income for basic living expenses.

Related information:
	Payday lending isn't the answer to your financial needs
	Alternative sources of financial assistance

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