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We have written this guide to make a complex rule practical. Since 2013, Australian law has banned non bank consumer lenders from issuing loans of $2,000 or less that required full repayment within 15 days. The law characterised these as short term credit contracts and prohibited credit licensees from entering such contracts or increasing their limits.
The ban has pushed most small loans into terms of at least 16 days so that they fell inside the small amount credit contract regime with explicit fee caps. The core references included section 133CA of the National Consumer Credit Protection Act 2009 and section 5 of Schedule 1 which contained the National Credit Code. ASIC reinforced the intent through product intervention orders and ongoing supervision.
We have focused on non bank consumer lenders that extended cash loans to individuals for personal use. Authorised deposit taking institutions sat outside the short term contract ban, although mainstream banks rarely structured products in this way. Brokers and comparison sites that provided credit assistance have also been covered, because section 124A set out that credit assistance in relation to a prohibited short term credit contract must not be given.
We worked from the statutory definition. A contract counted as short term where the credit limit sat at $2,000 or less and the term required repayment in 15 days or less. If both thresholds were met, the ban applied. It did not matter whether the contract used flat fees or an interest rate, because the prohibition targeted the contract type rather than the pricing formula.
We noted the carve out for authorised deposit taking institutions that operated under prudential supervision. That carve out did not suggest the rule lacked force, it only recognised the separate regulatory framework for banks. In practice, bank personal credit products used very different pricing and terms.
We also reviewed how continuing credit lines such as a digital wallet with a revolving limit might be treated. The short term contract definition referred to a contract that was not a continuing credit contract. That meant a revolving facility did not fall inside the short term definition. It still sat within the wider consumer credit framework and could attract other obligations and caps depending on design.
The legal spine remained stable for years. Section 133CA prohibited a licensee from entering a short term credit contract or increasing its limit. Section 124A prohibited licensees and their representatives from providing credit assistance in relation to a short term credit contract. The definition that mattered sat in section 5 of the National Credit Code. These provisions have been interpreted with reference to the general responsible lending obligations and the pricing caps that applied to other small and medium contracts.
The ban commenced on 1 March 2013 following the Enhancements Act reforms. Policymakers had observed extremely high effective costs on ultra short loans and a pattern of repeat borrowing that compounded harm. The ban removed the product category rather than trying to police price points within it. Treasury retained the approach in the Small Amount Credit Contract Review in 2016 and ASIC continued to act against avoidance models.
Once a lender set the term at 16 days or more, the product landed inside the small amount credit contract regime for loans up to and including $2,000. The law allowed a maximum establishment fee of up to 20 percent of the amount borrowed and a maximum monthly fee of up to 4 percent. Default fees could be charged, but the combined amount recoverable could not exceed twice the principal. These caps shaped the way most payday loans were structured over the last decade and they are still referenced by ASIC and state legal handbooks.
We compared market product pages over time and found that terms had been designed to avoid the 15 day definition. A 16 day term has not been an accident. It allowed providers to charge the capped fees instead of being forced entirely out of the market. This also explained why a large number of offers sat in the 2 to 12 month range even for very small amounts.
The following table summarised the practical boundaries consumers would encounter.
Even when a product sat inside the small or medium contract category, lenders still faced minimum inquiries about requirements and objectives, and needed to verify income and expenses using reliable evidence such as bank feeds or payslips. These inquiries formed part of the responsible lending framework that AFCA frequently considered when resolving disputes. Where a provider failed to test affordability or ignored obvious hardship triggers in the data, determinations often required refunds or adjustments.
ASIC’s product intervention powers have been used where lenders attempted to unbundle fees across associated entities to avoid caps. That approach was banned in 2019 following evidence of significant consumer detriment. ASIC also warned providers against steering borrowers into higher value contracts with fewer protections as a way to escape SACC caps. Advertising claims that suggested a 15 day repayment or that minimised the cost of a very short term remained risky territory.
The courts supported ASIC actions against avoidance models. Judgments against well known brands clarified that charging large fees through an associate to skirt the Code would not be tolerated. The product intervention orders were renewed and extended as needed to maintain protections. These cases mattered for consumers who had been charged excessive amounts through short term models because they opened pathways to refunds and debt waivers.
In 2025 ASIC warned payday lenders that conduct risks had been detected, including moving borrowers into contracts with fewer protections. The regulator signalled further enforcement where models appeared to push customers out of the capped SACC category. These signals sat alongside the new regulatory settings for buy now pay later that brought those products into the credit framework with licensing and suitability checks. The combined effect indicated a tighter environment for any quick cash offer that relied on minimal assessment.
If repayments became unmanageable, a borrower could lodge a hardship notice under section 72 of the National Credit Code. The lender then needed to respond and consider a variation such as lower repayments for a time or a longer term. Legal aid and community legal centres published plain English templates that helped with these requests. We have encouraged readers to keep everything in writing and to provide a realistic budget, because that usually led to a better outcome.
Where hardship did not solve the problem or where a contract looked unsuitable from the start, a customer could complain to the lender and then escalate to AFCA if unresolved. AFCA would examine the data that the lender used at the time, not just the result. If a product signalled a 15 day repayment on $2,000 or less from a non bank, that would justify an immediate report to ASIC because the law had banned such contracts outright.
We collected common signs that indicated a problem.
A quick licence search on the ASIC website often confirmed whether a business held an Australian credit licence. We also checked the business name and ABN in the online registers and matched contact details. If anything felt off, we advised consumers to stop and report the site to ASIC. The number for the National Debt Helpline offered a path to free financial counselling if someone already felt trapped.
Good Shepherd’s No Interest Loans scheme supported low income households with interest free credit for essentials. State programs such as Rentstart for bond assistance and emergency relief payments from community organisations also helped. These pathways avoided the compounding costs that a payday loan could trigger when things went wrong.
From 2025, buy now pay later products were brought into the credit regime with licensing and suitability checks. That shift reduced the risk of multiple accounts being used to juggle essential bills. It still paid to compare the total cost against a small amount credit contract, but the regulatory asymmetry that once existed narrowed.
Before anyone moved forward with a small loan, a simple checklist often prevented a later dispute.
A quick comparison between a capped SACC and a medium contract could be revealing. A very small need often cost less when handled through a short term payment arrangement with the provider rather than a new loan. Where a loan still made sense, the combination of capped fees and a realistic term usually created the best chance of paying it off without further harm.
The short term contract ban targeted non bank licensees. Banks did not sit inside that specific definition. In practice, banks did not offer 15 day micro loans to retail customers, so the carve out did not weaken consumer protections.
No. The general exemption for low cost credit up to 62 days did not override the targeted ban on short term contracts of 15 days or less for non bank licensees. A lender could not rely on the exemption to offer a 10 day micro loan to a consumer.
If a non bank provider issued a 15 day loan of $2,000 or less, you could save the evidence and seek help. A complaint to the lender and then to AFCA could recover fees. A report to ASIC would also be appropriate. Financial counsellors through the National Debt Helpline could assist with the plan.
We have relied on primary materials and leading guidance. These included the National Consumer Credit Protection Act 2009 section 133CA and the National Credit Code in Schedule 1, ASIC consumer and enforcement materials on small amount lending, Treasury’s 2016 review of small amount credit contracts, AFCA approach documents on responsible lending, and legal handbooks from state legal organisations.
We also considered ASIC media releases from 2019 on product intervention and from March 2025 on lender conduct, together with updates on the regulation of buy now pay later during 2025.
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Disclaimer
Loan Owl, a trading name for Simple Finance Group Pty Ltd (ABN 70 626 186 418) and holder of Australian Credit License 509422, operates as a lender and referral service. We do not endorse any specific credit contract. Upon receiving an offer or referral to a lending partner, they will evaluate your application, provide a suitable credit contract, and inform you of the outcome. Both we and our lending partners will disclose all fees, charges, and terms before any contract is entered into. We may receive a referral fee, the amount of which is not determinable. We advise seeking independent legal and financial counsel before engaging in any financial products. The rates and loan terms provided on this website are for indicative purposes only. Loan Owl, as a lender, may process applications within 60 minutes, and loan disbursement may occur immediately upon contract signing. However, the timing of fund disbursement depends on your banking institution's policies.
*Approved funds are transferred on the same day, subject to approval during business hours and completion of all required documentation including Pay to bank agreements. Transfer times may vary depending on your bank’s processing times. Not all banks support instant deposits, and some transactions may take longer to reflect in your account.