Payday Loan Laws in Australia: What Borrowers Need to Know

Payday loans can appear straightforward, but the laws governing them include important limits on loan amounts, fees, repayments and lender conduct.

In Australia, payday loans are legal, but most are regulated as small amount credit contracts, often shortened to SACCs. These contracts are subject to the National Consumer Credit Protection Act 2009 and the National Credit Code.

In this guide, we explain the payday loan laws Australia has in place, what licensed lenders must do and what rights you have if a repayment becomes difficult.

The information is current as at 30 July 2026 and is general information only. It does not constitute legal or financial advice.

The Direct Answer: Are Payday Loans Legal in Australia?

Yes. Payday loans are legal in Australia when they are provided in accordance with national consumer credit laws.

Most products commonly described as payday loans are small amount credit contracts. A SACC generally:

• Provides credit of no more than $2,000.

• Has a term of at least 16 days and no more than 12 months.

• Is not a continuing or revolving credit contract.

• Is not issued by an authorised deposit-taking institution, such as a bank.

• Is unsecured, meaning the borrower does not provide an asset as security.

Loans with terms shorter than 16 days are generally prohibited for licensed credit providers. ASIC describes SACCs as high-cost, short-term loans and monitors lenders’ compliance with the additional protections that apply to them. (Federal Register of Legislation)

What Laws Regulate Payday Loans in Australia?

The main legal framework includes:

• The National Consumer Credit Protection Act 2009.

• The National Credit Code, contained in Schedule 1 of that Act.

• The National Consumer Credit Protection Regulations 2010.

• ASIC rules, determinations and regulatory guidance.

ASIC is the national consumer credit regulator. A business engaging in regulated credit activity generally needs an Australian credit licence or authorisation from a licence holder. Consumers can search ASIC’s professional registers to check a provider’s licensing status. (ASIC)

The legal name of a product matters less than how the contract actually works. A provider calling something a cash advance, short-term advance or quick loan does not necessarily place it outside consumer credit law.

Australian Payday Loan Laws at a Glance

These rules apply specifically to contracts that meet the legal definition of a SACC. Other credit products may be regulated under different provisions. (Federal Register of Legislation)

How Much Can a Payday Lender Charge?

A SACC cannot impose interest, including default interest. Instead, the law permits certain types of fees and places limits on the main fees.

Establishment Fees

The establishment fee cannot exceed 20% of the adjusted credit amount.

For example, the maximum establishment fee on a $500 SACC would generally be $100.

A provider cannot impose an establishment fee on an amount used to refinance credit from another SACC. This rule is intended to reduce the additional cost that can arise when one small loan is used to repay another. (Federal Register of Legislation)

Monthly Fees

The monthly fee cannot exceed 4% of the adjusted credit amount for each month.

For a $500 loan, the maximum monthly fee would generally be $20 per month. The monthly fee is calculated from the credit amount rather than from the declining unpaid balance. (Federal Register of Legislation)

A Simple Cost Example

Consider a fictional $500 SACC with a three-month term where the lender charges the maximum establishment and monthly fees.

This example does not include a government charge, a permitted default charge or enforcement expenses. A lender may also charge less than the legal maximum.

Moneysmart cautions that payday loan fees can make the total repayment substantially higher than the amount borrowed, even though interest itself is prohibited. (Moneysmart)

Is There a Limit on Repayments?

Yes. Under the protected earnings rules, a lender must not enter into or offer a SACC when the required repayments, combined with repayments under the borrower’s other SACCs, would exceed 10% of the borrower’s net income.

Net income means income after deductions such as tax.

The cap applies across SACCs held with any SACC lender, not just the provider assessing the new application. It replaced an earlier limit based on 20% of gross income.

This is an important protection, but it does not automatically mean a repayment will be affordable. Ten per cent of your net income may still be difficult to manage after rent, groceries, transport, utilities and other debts are taken into account.

Before borrowing, it is worth preparing a realistic budget based on the income and essential expenses that will fall due during the repayment period.

Repayment Amounts Must Generally Be Equal

Payday loan laws also regulate how SACC repayments are structured.

Repayment amounts and the intervals between repayment dates must generally be equal. Limited exceptions apply, including when the final repayment is up to 5% lower than the other repayments.

The period between receiving the credit and making the first repayment also cannot be more than twice the interval between the first and second repayments. These requirements are designed to prevent unusually large or uneven repayment arrangements. (Federal Register of Legislation)

What Happens if You Repay the Loan Early?

You can pay out a regulated credit contract early.

For a SACC, the provider cannot require or accept monthly fees for a month that begins after the contract has been paid out. This means early repayment may reduce the number of monthly fees you pay, depending on the timing and terms of the contract. (Federal Register of Legislation)

Before paying early, ask the lender for the payout figure and confirm which fees are included.

What Happens if You Miss a Payment?

A SACC may include a permitted fee or charge that becomes payable following a default. However, there is a broader limit on the amount the lender can recover.

When a borrower defaults, the provider generally cannot recover more than twice the adjusted credit amount through repayments or other recovery. Reasonable enforcement expenses are excluded from this cap. (Federal Register of Legislation)

For example, the statutory recovery cap for a SACC with an adjusted credit amount of $500 would generally be $1,000, excluding enforcement expenses. This does not mean a lender may automatically charge the full difference as a default fee. Any fee must still be authorised by the contract and allowed by law.

Contact the provider as early as possible if you believe a repayment will fail. Waiting may result in additional costs, collection activity or damage to your credit history, depending on the contract and how the provider reports credit information.

Payday Lenders Must Assess Whether a Loan Is Unsuitable

Licensed lenders must comply with responsible lending obligations.

Before entering into a regulated credit contract, the provider must make inquiries and verify information about the consumer’s financial situation. It must assess whether the contract would be unsuitable.

A contract may be unsuitable when:

• The borrower is likely to be unable to meet the repayments.

• The borrower could only make the repayments with substantial hardship.

• The contract does not meet the borrower’s requirements and objectives.

A licensed provider must not enter into a contract it has assessed as unsuitable. The statutory 10% income cap is an additional rule and does not replace this individual affordability assessment. (ASIC Downloads)

ASIC reported in 2025 that some SACC and medium amount lenders might have been falling short of responsible lending or product distribution obligations. This reinforces the importance of reviewing the contract yourself rather than assuming that availability means the product is suitable for your circumstances. (ASIC Downloads)

Can a Payday Lender Send You Another Loan Offer?

There are restrictions on unsolicited payday loan marketing.

A SACC lender generally must not send an unsolicited communication containing an offer or invitation to apply to a consumer who has previously applied for or held a SACC. The restriction can also cover people who applied for or held a SACC with another provider. (Federal Register of Legislation)

This may include an unsolicited phone call, email, text message or other electronic communication.

Routine account servicing messages are different from communications inviting you to borrow again. If a message appears to be encouraging another application, keep a copy in case you need to raise a complaint.

Your Right to Request Financial Hardship Assistance

You do not need to wait until you have missed a repayment to contact a lender.

When you believe you are or will be unable to meet your obligations, you can give the provider a hardship notice verbally or in writing. The provider must consider the request and may ask for information relevant to your circumstances and your ability to make repayments. (Federal Register of Legislation)

Possible assistance may include:

• Changing the repayment schedule.

• Temporarily reducing repayments.

• Deferring a payment.

• Agreeing to a payment plan.

The lender does not have to approve every requested arrangement. However, it must follow the applicable process and give reasons if it refuses a formal hardship request. In many cases, a response is required within 21 days, although the timing may change if the lender requests more information. (Federal Register of Legislation)

Only agree to a revised repayment amount that you can realistically afford.

How to Make a Complaint About a Payday Lender

Start by contacting the lender and clearly explaining:

• What happened.

• Why you believe it was incorrect or unfair.

• The outcome you are seeking.

• The relevant account or contract number.

If an initial conversation does not resolve the issue, make a formal complaint through the provider’s internal dispute resolution process. Put the word “complaint” in the subject line and keep copies of your contract, bank statements and correspondence.

If the complaint remains unresolved, you may be able to complain to the Australian Financial Complaints Authority. AFCA provides free, independent dispute resolution for consumers dealing with participating financial firms. (Moneysmart)

ASIC accepts reports about suspected misconduct, but it does not normally resolve an individual dispute or recover money for a particular consumer.

Payday Loans and Wage Advances Are Not Automatically the Same

Payday loans and wage advance services can both provide access to a relatively small amount of money before your next payday, but they are not automatically the same type of product.

Their fees, repayment structures and legal treatment can differ. The applicable rules depend on the terms and legal structure of the particular contract, not simply the marketing name. Moneysmart advises consumers to check the cost, interest or charges, repayment timing and consequences of non-payment for each type of cash-flow product. (Moneysmart)

Our MyPayNow product is described as a wage advance. Approved customers can access up to 25% of their net wage, capped at $2,000. Our current pricing is a fixed credit charge of 5% of the amount advanced, plus interest at 24% per annum on the outstanding balance, capped at 62 days. Eligibility, assessment and product terms apply. (MyPayNow)

For example, our current FAQs show that a $100 advance repaid after seven days would include a $5 fixed charge and approximately $0.48 in interest, resulting in a total repayment of $105.48. (MyPayNow)

You can review how our wage advance works, read our pay advance FAQs and check our Target Market Determination before deciding whether the product may be appropriate for you.

A wage advance still reduces the money available from a future pay. Consider that impact alongside the total cost and any bills due around your scheduled repayment date.

Alternatives to Consider Before Borrowing

Borrowing may not be the most suitable response to every shortfall. Depending on the expense, alternatives may include:

• Asking the bill provider for an extension or payment plan.

• Contacting a utility or telecommunications hardship team.

• Checking whether you qualify for a Centrelink advance.

• Considering a No Interest Loan for eligible essential expenses.

• Using available savings.

• Delaying a non-essential purchase.

• Reviewing your household budget.

• Speaking with a free financial counsellor.

Moneysmart identifies No Interest Loans, Centrelink advances and negotiated bill arrangements as potentially cheaper alternatives to payday loans for eligible consumers. (Moneysmart)

If you are considering a new loan to repay an existing payday loan, seek independent help before proceeding. Replacing one short-term debt with another can increase the overall cost and make future pay cycles harder to manage.

A Borrower’s Checklist

Before entering into a payday loan or another short-term credit arrangement, check the following.

Who Is Providing the Credit?

Confirm the business name and check whether it holds or operates under an appropriate Australian credit licence.

What Is the Legal Type of Contract?

Do not rely only on words such as payday loan, cash advance or wage advance.

How Much Will You Repay in Total?

Include every establishment fee, monthly charge, interest amount and other permitted cost.

When Will Each Repayment Be Taken?

Compare the schedule with your pay dates and essential bills.

Can You Manage With Less Money on the Next Payday?

A short-term advance solves a timing problem by bringing future money forward.

What Happens if a Repayment Fails?

Read the default, direct debit, collection and hardship terms.

Are There Cheaper Alternatives?

Consider payment plans, hardship assistance and no-interest options first.

Frequently Asked Questions

Are Payday Loans Banned in Australia?

No. Payday loans are not completely banned, but regulated providers must comply with strict rules. Loans that meet the SACC definition are limited to $2,000 and must run for between 16 days and 12 months. Very short credit contracts of less than 16 days are generally prohibited for licensed credit providers.

Can Payday Lenders Charge Interest?

A small amount credit contract cannot impose interest or default interest. It may instead include specified fees, such as an establishment fee of up to 20% and a monthly fee of up to 4% of the adjusted credit amount. (Federal Register of Legislation)

Can a Payday Lender Take More Than 10% of My Income?

A provider must not enter into or offer a SACC if the repayments, together with your other SACC repayments, would exceed 10% of your net income.

This rule does not mean the loan is necessarily affordable for you because your other living expenses must still be considered.

Can I Pay Off a Payday Loan Early?

Yes. When a SACC is paid out early, the provider cannot collect monthly fees relating to months that begin after the payout date. Ask for a written payout figure so you know the amount required to close the contract. (Federal Register of Legislation)

What Should I Do if I Cannot Make a Repayment?

Contact the provider’s hardship team as soon as possible and explain what you can afford. You can make a hardship request verbally or in writing.

Free assistance is also available through the National Debt Helpline on 1800 007 007. (Federal Register of Legislation)

Is a Wage Advance Covered by Payday Loan Fee Caps?

Not necessarily. The legal treatment depends on the structure and terms of the product.

Review the provider’s contract and disclosures rather than assuming every product available before payday is regulated as a SACC. (Moneysmart)

Understand the Cost Before Deciding

Australia’s payday loan laws provide important protections, including limits on fees and repayments, responsible lending obligations, hardship rights and access to independent complaints processes.

However, legal compliance alone does not make a product suitable for every borrower. Before proceeding, compare the total repayment with your income, essential expenses and upcoming commitments.

When you are not experiencing financial hardship and believe a short-term wage advance may suit your circumstances, you can review our wage advance information and current terms.

Approval is not guaranteed, eligibility criteria apply and you should only request an amount you believe you can comfortably repay.