How ASIC Regulates Short-Term Lenders in Australia

Short-term credit can take several forms in Australia, including payday loans, wage advance services and other products designed to be repaid over a relatively short period.

But are all short-term credit providers regulated in the same way?

No. The rules depend on how the product is structured, how long the credit lasts, what it costs and whether it falls within the National Credit Code.

ASIC oversees Australia’s consumer credit sector, but different short-term arrangements can be subject to different requirements, protections or exemptions.

In this guide, we explain ASIC’s role, how payday loans and wage advances can differ, and what you should check before accepting any form of short-term credit.

What Role Does ASIC Play in Short-Term Lending?

The Australian Securities and Investments Commission, commonly known as ASIC, is Australia’s national regulator for companies, financial services and consumer credit.

For consumer lending, ASIC administers and enforces legislation including the National Consumer Credit Protection Act 2009 and the National Credit Code. These laws regulate many loans used for personal, domestic or household purposes.

ASIC’s work can include:

• Administering the Australian credit licensing system.

• Monitoring lenders and credit assistance providers.

• Enforcing responsible lending obligations.

• Reviewing advertising and disclosure practices.

• Investigating suspected misconduct.

• Taking administrative, civil or criminal enforcement action.

• Using product intervention powers where a credit product creates a risk of significant consumer harm.

ASIC’s product intervention power may be used even when ASIC has not established a separate breach of the law. The focus is on whether a financial or credit product has caused, is causing or is likely to cause significant consumer detriment.

ASIC Does Not Regulate Every Short-Term Product in the Same Way

“Short-term lending” is an everyday description rather than one specific legal product category.

A short-term product could be:

• A small amount credit contract, commonly called a payday loan.

• Another regulated consumer loan.

• An exempt short-term credit arrangement.

• A wage advance service.

• A continuing credit arrangement.

• Another form of credit with its own legal treatment.

The name used in an advertisement or app does not determine which laws apply. The contract’s structure, duration, fees, interest, repayment terms and purpose are more important.

This matters because a regulated payday loan and a short-term arrangement relying on an exemption may not carry the same licensing, responsible lending and disclosure obligations.

Australian Credit Licensing Requirements

Businesses engaging in regulated consumer credit activities generally need to hold an Australian credit licence or be authorised by a licence holder.

ASIC explains that people and businesses engaging in credit activities will generally need a licence or authorisation unless an exemption applies. This can include lenders, lessors, brokers and other credit service providers.

Holding a credit licence does not mean ASIC has endorsed every product offered by the business. It means the licensee must meet the legal obligations applying to its regulated credit activities.

Depending on the provider and product, these obligations can include:

• Operating efficiently, honestly and fairly.

• Complying with applicable credit laws.

• Maintaining appropriate systems and staff competence.

• Having an internal dispute resolution process.

• Belonging to the Australian Financial Complaints Authority where required.

• Managing conflicts of interest.

• Complying with responsible lending obligations where they apply.

You can search ASIC’s professional registers to check whether a provider holds an Australian credit licence or is authorised as a credit representative.

However, the absence of a licence does not automatically prove that a provider is operating unlawfully. Some products or activities may fall within a specific exemption.

How Responsible Lending Obligations Work

Responsible lending is an important protection for consumer credit regulated by the National Credit Act.

For credit covered by these rules, a licensee must not enter into, suggest or assist with a credit contract that is unsuitable for the consumer.

The provider will generally need to make reasonable inquiries about your:

• Requirements and objectives.

• Income and financial situation.

• Regular living expenses.

• Existing debts and financial commitments.

• Ability to meet the repayments without substantial hardship.

The provider must also take reasonable steps to verify relevant financial information.

A credit contract may be unsuitable when it does not meet your stated requirements and objectives, or when you would be unable to meet your financial obligations without substantial hardship.

Responsible lending does not require a provider to prove that a loan is the best possible product for you. The legal assessment generally focuses on whether the proposed credit contract is “not unsuitable”.

Meeting a provider’s basic eligibility requirements does not guarantee approval. Your application must still be assessed under the requirements that apply to the provider and product.

How ASIC Regulates Payday Loans

Under Australian consumer credit law, a payday loan is generally a small amount credit contract, also known as a SACC.

Moneysmart describes a payday loan as a loan of up to $2,000 that must be repaid over a period of between 16 days and one year. These contracts are regulated under the National Credit Act and are subject to rules in addition to the general responsible lending framework.

Fee Limits on Payday Loans

A payday lender cannot charge interest on a small amount credit contract. Instead, the lender may charge certain permitted fees.

Current fee caps generally include:

• An establishment fee of up to 20% of the amount borrowed.

• A monthly fee of up to 4% of the amount borrowed.

• Permitted default fees, subject to an overall legal cap.

Even without interest, these fees can significantly increase the total amount you repay.

For example, a 20% establishment fee on a $1,000 payday loan would be $200 before monthly or other permitted fees are added.

This is why we encourage you to look at the total dollar amount repayable rather than focusing only on whether a product charges interest.

Payday Loan Repayment Protections

Special rules limit how much of a borrower’s income can be committed to payday loan repayments.

Moneysmart states that repayments on a payday loan must generally be no more than 10% of the borrower’s after-tax income over the repayment period. In simple terms, repayments should not exceed $10 for every $100 of after-tax income.

Payday lenders must consider this restriction alongside their other assessment obligations.

Restrictions on Unsuitable and Repeat Lending

Payday lenders must assess whether a contract would be unsuitable and follow additional rules intended to reduce harmful lending practices.

ASIC has continued to examine whether small amount lenders are complying with these obligations.

In its March 2025 review, ASIC raised concerns that some small and medium amount credit providers might be entering into unsuitable contracts, distributing products outside their intended target markets or using business models that could avoid protections applying to small amount credit contracts.

This is one reason to examine the substance of a product rather than assuming that every short-duration credit arrangement is a regulated payday loan.

What Is the Short-Term Credit Exemption?

Some low-cost credit provided for no more than 62 days may fall outside parts of the National Credit Code when strict conditions are satisfied.

Under the commonly referenced short-term credit exemption, an arrangement must generally meet conditions including:

• The credit is provided for no more than 62 days.

• Fees and charges do not exceed 5% of the amount of credit.

• Interest does not exceed an amount equivalent to 24% per annum.

These conditions are associated with section 6(1) of the National Credit Code and related provisions.

An arrangement that falls within the exemption may not be subject to the full licensing and responsible lending framework that applies to regulated consumer loans.

However, a provider relying on an exemption does not operate without legal responsibilities.

Other consumer protection laws may still apply. ASIC may also retain powers relating to misleading or deceptive conduct, unfair contract terms and product intervention. Privacy obligations can apply separately under Australian privacy law.

The application of an exemption can be legally complex. You should not assume that a product is exempt simply because it lasts for fewer than 62 days.

How Does ASIC Deal With Attempts to Avoid Credit Laws?

ASIC can look at the substance and overall effect of an arrangement, including associated contracts, service agreements and charges.

Some historical short-term lending models combined a low-cost credit contract with a separate service agreement. While the credit component appeared to meet an exemption, the combined charges could leave consumers paying substantially more.

ASIC has used product intervention powers to address short-term credit models involving collateral service contracts where the overall fees or interest created a risk of significant consumer detriment.

ASIC has also imposed conditions designed to prevent providers from using associated contracts to charge more than the short-term credit limits allow.

This approach helps prevent a provider from relying on a technical contract structure to impose costs that undermine consumer protection laws.

What Is ASIC’s Product Intervention Power?

ASIC’s product intervention power allows it to restrict or prohibit features of financial and credit products when significant consumer detriment has occurred, is occurring or is likely to occur.

Depending on the circumstances, an intervention order may:

• Restrict particular fees or charges.

• Prevent certain product features.

• Limit how a product is distributed.

• Impose conditions on providers.

• Prohibit a product or lending model.

The power is both preventive and reactive. ASIC does not necessarily need to wait for widespread losses or prove a separate legal breach before intervening.

Advertising and Disclosure Requirements

ASIC can also scrutinise how lenders and credit providers advertise their products.

Advertising should not create a false or misleading impression about matters such as:

• The total cost of borrowing.

• The likelihood of approval.

• How quickly funds may arrive.

• Eligibility requirements.

• Affordability assessments.

• Missed-payment costs.

• The consequences of failing to repay.

• Whether a product is regulated under the National Credit Act.

An advertisement can be misleading even when an individual statement is technically accurate. Problems may arise when important conditions are hidden, presented in unclear fine print or contradicted by the advertisement’s overall message.

ASIC’s advertising guidance says providers should not overstate potential benefits or give them more prominence than relevant risks and limitations. Important qualifications should be presented clearly, and a headline claim must not itself be misleading.

Be cautious of claims such as “guaranteed approval”, “free money” or “no questions asked”. A responsible provider should clearly explain its fees, eligibility process, repayment arrangements and important conditions.

Are Wage Advance Services the Same as Payday Lenders?

Not necessarily.

A wage advance service generally provides access to credit based on a portion of your expected pay before your usual payday. Depending on how it is structured, it may be treated differently from a small amount credit contract.

Moneysmart refers to wage advances as pay advance or pay-on-demand services. These services usually set a limit on how much you can access from a pay cycle and arrange repayment from a future payday. However, costs and repayment options vary between providers.

Because the legal treatment depends on the complete contractual arrangement, you should review the current terms and disclosures rather than assuming that every wage advance carries the same protections, costs or regulatory classification as a payday loan.

How Our Wage Advance Works

MyPayNow is a wage advance service.

With us, eligible customers may access up to a quarter of their net pay, capped at $2,000.

Our published pricing is:

• A fixed fee of 5% of the amount advanced.

• Interest at 24% per annum on the outstanding balance.

• Interest capped at 62 days.

For example, our current FAQ explains that a $100 advance repaid after seven days would include a $5 fee and approximately $0.48 in interest, making the total repayment approximately $105.48.

Terms, conditions and eligibility criteria apply. Approval is not guaranteed.

Our wage advance is designed for employed Australian residents aged 18 or older who meet our eligibility and assessment criteria. Our target market does not include people who are experiencing financial hardship or who could not afford the repayment without hardship.

You can review how our wage advance works and read our current frequently asked questions before deciding whether it may be appropriate for your circumstances.

A wage advance is still a financial commitment. Accessing part of your pay early means you will have less money available from a future pay cycle.

Before requesting an advance, consider whether you will still be able to cover rent, food, utilities, transport, medical expenses and other essential commitments.

What ASIC Regulation Does Not Guarantee

ASIC plays an important role in Australia’s consumer credit system, but regulation does not mean that:

• Every short-term credit product is low cost.

• Every product will be suitable for your circumstances.

• Your application will be approved.

• Repayments will automatically be affordable for you.

• A provider will never breach the law.

• ASIC has individually approved or recommended a provider.

• Borrowing will solve an ongoing budget shortfall.

You remain responsible for reviewing the agreement, understanding the total cost and deciding whether the repayment fits your financial position.

Questions to Ask Before Using Short-Term Credit

Before accepting a payday loan, wage advance or another short-term arrangement, consider the following questions.

What Will I Repay in Total?

Add together the amount advanced, interest, establishment costs, monthly fees, transaction charges and any other costs.

Look for a total dollar figure rather than relying only on percentages.

When Is the Repayment Due?

Check the repayment date and whether payment will be taken automatically.

You should also understand what happens if:

• Your pay date changes.

• Your employer pays you late.

• There is not enough money in your account.

• You need to request a different repayment arrangement.

Is the Provider Relying on a Legal Exemption?

The provider’s terms and disclosure documents may explain whether the product is regulated under the National Credit Act or relies on an exemption.

When the wording is unclear, ask the provider directly.

What Happens if I Cannot Repay on Time?

Review the provider’s missed-payment process, possible costs, collection procedures and available support options.

Contact the provider as early as possible if you think a repayment may be difficult. Waiting until after a payment is missed can reduce the options available.

Will I Have Enough Left for Essential Expenses?

Consider the expenses due after your next pay arrives, including:

• Rent or mortgage payments.

• Groceries.

• Electricity, gas and water.

• Transport.

• Medical expenses.

• Childcare.

• Existing credit repayments.

A repayment that looks manageable in isolation may be difficult once your other expenses are included.

Am I Using Short-Term Credit Repeatedly?

Regularly advancing part of your pay can make it harder to manage the next pay cycle.

Moneysmart recommends limiting how much and how often you use pay advance services, sticking to one service at a time and avoiding borrowing to repay another loan, credit card or buy now, pay later balance.

If you are repeatedly borrowing for normal living expenses, consider speaking with a free financial counsellor.

Are There Lower-Cost Alternatives?

Depending on the expense and your circumstances, alternatives to short-term credit could include:

• Using available savings.

• Requesting a bill extension.

• Asking for a payment plan.

• Speaking with a service provider about hardship assistance.

• Delaying a non-essential purchase.

• Reviewing your household budget.

• Checking whether you qualify for a Centrelink advance.

• Checking your eligibility for a No Interest Loan.

• Speaking with a free financial counsellor.

A No Interest Loan can generally provide up to $2,000 for eligible essential goods and services, or up to $3,000 for certain housing or natural disaster-related costs.

These loans have no interest or fees, although they are generally paid directly to the supplier rather than provided as cash.

Considering alternatives does not mean that every form of short-term credit is inappropriate. It helps you compare the available options and make a more informed decision.

How to Make a Complaint About a Short-Term Credit Provider

Start by contacting the provider’s internal complaints team.

Clearly explain:

• What happened.

• When it happened.

• Why you are dissatisfied.

• The outcome you are seeking.

• Which documents support your complaint.

If the matter is not resolved, you may be able to lodge a complaint with the Australian Financial Complaints Authority, commonly called AFCA.

AFCA provides a free, fair and independent dispute resolution service for eligible complaints about member financial firms, including complaints concerning credit, finance and loans. The first step is usually to raise the issue directly with the financial firm.

ASIC does not usually resolve individual compensation disputes. However, reporting suspected misconduct to ASIC can help the regulator identify broader patterns or possible consumer harm.

If repayments are affecting your ability to pay for essential living costs, you can contact the National Debt Helpline on 1800 007 007. Financial counselling is free, confidential and independent.

Frequently Asked Questions

Does ASIC Approve Every Short-Term Lender?

No. ASIC regulates consumer credit activities and administers licensing requirements, but an Australian credit licence is not an endorsement or recommendation of a provider or product.

Are Payday Loans Legal in Australia?

Yes. Payday loans can be offered legally when the lender complies with the National Credit Act, applicable licensing requirements, responsible lending obligations, fee limits and the other rules applying to small amount credit contracts.

Is Every Loan Lasting Fewer Than 62 Days Exempt From Credit Laws?

No. Duration is only one part of the exemption.

The arrangement must also satisfy limits relating to fees, charges and interest, along with any other relevant legal requirements.

Are Wage Advances Regulated in the Same Way as Payday Loans?

Not automatically.

The legal treatment of a wage advance depends on how the service is structured. Some wage advance arrangements may rely on an exemption rather than being regulated as small amount credit contracts.

You should read the provider’s current terms and disclosures to understand the arrangement you are entering into.

Can ASIC Stop a Harmful Lending Product?

ASIC may take enforcement action or use its product intervention power when the applicable legal tests are met.

A product intervention order can restrict or prohibit features of a product or lending model when it has caused, is causing or is likely to cause significant consumer detriment.

What Should I Do if I Cannot Afford a Repayment?

Contact the provider as early as possible and ask what support or repayment options are available.

You can also speak with a free financial counsellor through the National Debt Helpline.

Taking out additional credit to cover an existing repayment may increase financial pressure and make the next repayment more difficult.

Understand the Rules Before You Borrow

ASIC plays an important role in regulating consumer credit, administering licensing requirements, enforcing responsible lending laws and responding to harmful short-term credit practices.

However, not every product marketed as short-term credit falls under the same rules.

Payday loans, exempt short-term credit arrangements and wage advances can have different legal structures, costs and consumer protections.

Before accepting any financial product, review:

• The total amount you will repay.

• When repayment is due.

• The applicable fees and interest.

• The contract terms.

• The effect on your next pay.

• The support available if your circumstances change.

You should also consider whether a lower-cost alternative is available.

If you are considering a wage advance with us, review our current eligibility information, fees, terms and repayment process before applying.

Approval is subject to our assessment process, and you should only consider an advance when you can manage the repayment without compromising your essential expenses.

The information provided in this blog is for general informational purposes only and does not constitute financial advice. It is not tailored to the specific circumstances of any individual. Before acting on this information, you should consider whether it is appropriate for you, having regard to your objectives, financial situation and needs.