Alternative Law Journal
Government regulation is needed to prevent pay day lenders taking advantage of the vulnerable.
Australia is an increasingly unequal society. It is a matter of national shame that while the rich increase their wealth, and the country as a whole becomes wealthier, poverty in our community increases. Those on a fixed income dominate the number of people living in poverty, however, there has been a dramatic increase of people in full-time employment who live in poverty — the so-called ‘working poor’. According to the Australian Bureau of Statistics, there are 800,000 low paid working households in Australia. An increase in poverty has led to an increase in the number of people seeking short-term cash for survival. Of the 800,000 working poor, 41,000 sold or pawned something because they were short of money. Moreover, a number of factors have, in recent times, exacerbated this situation. These include:
• a growth in gambling;
• increasing corporatisation/privatisation/deregulation of essential services has led to a range of punitive measures against the poor, for example, late payment fees for utilities bills; and
• the inequitable impact of the New Tax System — the GST is a flat tax that disproportionately impacts on the poor.
The market place has responded to the increased demand for short-term cash with an increased range of get-rich-quick schemes, pyramid selling promotions, mail-order promotions and other scams. One opportunist industry that has recently entered the market place stands out for special consideration — pay day lending.
Pay day lenders are short-term credit providers. A typical pay day lending transaction consists of a consumer taking a loan for a small amount (although loans are not restricted to small amounts) that is repaid by their next pay day. The pay day lender charges a ‘fee’ for this service. A typical pay day lending transaction would see a consumer borrow $200 to be repaid within 14 days for a fee of $50 (at a rate of a $25 fee per $100 borrowed). Such a loan has an effective interest rate of 650% per annum. Effective interest rates as high as 1300% have been reported in Australia.
Apart from the obviously exorbitant, exploitative interest rates, pay day lenders display a number of other undesirable characteristics. Two in particular are worthy of comment.
Members of the Australian pay day lending industry claim they do not target low-income consumers. Peter Llewellyn, the Managing Director (at the time) of one of the leading pay day lending franchises, Australian Money Exchange, has suggested that ‘[t]he majority of our members are employed on average earnings of $30,000 or more …’ and that ‘[w]e certainly do not target the poor’. Studies in the US have shown the profile of the average customers of pay day lenders include a strong representation of the working poor and those on fixed incomes. There is significant anecdotal evidence in Australia that pay day lenders are actively targeting low and fixed-income consumers. Financial counsellors and other consumer workers, through their casework practices, are reporting an increasing number of clients on low or fixed incomes approaching them for assistance after borrowing from pay day lenders. Often these consumers are at the point of declaring bankruptcy. It appears that fixed incomes, that is pensions, are regularly accepted as sufficient income to obtain a loan. The establishment of pay day lending outlets overwhelmingly in low-income suburbs (or low-income areas within suburbs) casts further doubt on the claims of pay day lenders.
The practice of ‘rolling over’ loans and multiple loan exposure for consumers over a set period of time has become a serious issue in the US. The Illinois Department of Financial Institutions found an average of 13 contracts for each pay day loan customer during a six-month period. The leading consumer advocate in the United States, Ralph Nader, has suggested ‘[t]he average borrower takes out 11 such loans a year.’ There is already evidence of similar patterns of borrowing developing in Australia. Moreover, multiple pay day lending businesses tend to open in one location. This leads to even greater debt-trap problems. One of the leading US reports on pay day lending notes:
A Wisconsin news article described a consumer who borrowed more than $1200 from all five payday lenders in her town and was paying $200 every two weeks just to cover the fees without reducing principal.
Similar patterns of borrowing have been reported in Australia. Pay day lenders deny that rollover is a common practice.
In addition, pay day lenders will often take collateral for a loan — cars, even baby furniture have been used. The value of the collateral generally far exceeds the amount of the loan. Needless to say, many pay day loan contracts force the consumer to forfeit the entire recoverable value of the collateral if they default on the loan. These debt traps are exacerbated by the use of direct debit arrangements by pay day lenders (see discussion on direct debits below).
A report commissioned by the Queensland Government (the Queensland Government Report) on pay day lending noted that, as at May 2000, there were 82 outlets offering pay day loans in Australia. The report predicted approximately 400 outlets by 2005, growing to 800 outlets by 2010. It has been reported that there are about 40 pay day lending outlets in Victoria with a total consumer debt of approximately $50 million. Nationally, it is likely that there are well over 150 outlets and $200 million in debt. In the US, there are thousands of outlets and the industry turnover is in the multiple billions. Franchises in Australia include Money Plus and Australia Money Exchange (now known as Blue Star). A large franchise, ChequEXchange, has recently been wound up. Pay day lenders operate throughout Australia (except Tasmania).
The national consumer movement began a campaign to end pay day lending approximately 18 months ago. Consumer advocates formed the view that the campaign should have two principal objectives: first to end pay day lending in Australia and second to develop fair and accessible alternatives to meet the short-term cash needs of those in poverty. It was considered that the conservatism of consumer protection policies and the concomitant reluctance of government to ban industries, especially industries that consist of franchised small businesses, required approaches other than simply seeking a ban but that would ultimately make pay day lending both unpopular and commercially unviable. The view was formed among advocates that pay day lending ought to be brought within the regulatory framework that applies to other businesses that lend to consumers. Accordingly, the consumer movement developed the following recommendations to deal with pay day lending:
• short term lending as practised by pay day lenders to be regulated by the Uniform Consumer Credit Code (the Code);
• the Code interest rate cap of 48% that applies in New South Wales, Victoria and the Australian Capital Territory to be retained, and all other States (and the Northern Territory) to implement the same interest rate cap; and
• ‘interest’, for the purposes of the cap, to be defined to include all relevant fees and charges, so that the actual cost of credit does not exceed the cap.
One of the key campaign initiatives was a national protest day held on 3 April 2001. The protest was held outside the offices of two pay day lenders, Australian Money Exchange in Bankstown and ChequEXchange in Fitzroy. The protest day received substantial media coverage and a swift reaction from governments.
The pay day lending campaign is a reminder of the power of the national consumer movement when unified against an industry (or industry practice) that it believes is harmful to consumers, especially low-income and vulnerable consumers. It has long been the case that ‘[c]ommunity legal centres have worked in conjunction with financial counsellors to challenge many finance industry practices which have previously been subject to very little scrutiny’.
The campaign to end pay day lending has brought together, in a strong coalition, community legal centres, community-based financial counsellors, consumer organisations and church-based advocacy organisations. The casework practices of many of these agencies, particularly community legal centres, has been central to informing campaign strategies and practices (not the least being the use of the media).
The Code regulates the provision of consumer credit in Australia. Certain credit transactions are, however, exempted from the operation of the Code. One of these exemptions is where the period of credit provision is for less than 62 days. The exemption was intended ‘to allow banks to provide short-term bridging finance and for trade credit arrangements’. Pay day lenders have exploited this ‘loophole’ in the Code by providing credit for periods of less than 62 days (generally they provide credit for 14-28 days).
In part as a result of the national campaign mounted by consumer advocates, the Ministerial Council on Consumer Affairs, agreed to the introduction of the Consumer Credit (Queensland) Amendment Act 2001. The Act amends s.7(1) of the Code in such a way that pay day lenders will no longer be able to utilise the exemption. The Code changes, which commenced operation on 10 December 2001 and have national effect (the Queensland Act is a template for the majority of Australian jurisdictions), will require pay day lenders to disclose certain terms of loans, including fees and charges payable and to disclose whether security is required. Consumers must also be provided with a copy of their loan contracts. Pay day lenders will be required to make an assessment of capacity to pay loans.
Unfortunately, Code changes outside of New South Wales, Victoria and the Australian Capital Territory will have little effect as they currently stand. By bringing pay day lending under Code regulation, disclosure and assessments regarding capacity to repay are mandated. This is seen to be important as ‘[o]ften there was nothing in writing, no disclosure of the conditions and no assessment made of the borrower’s capacity to repay [pay day lending loans]’. Nonetheless, it appears that the majority of pay day lending contracts (and transactions) already comply with Code requirements for disclosure and assessing capacity to repay. In any event, disclosure is a weak form of consumer protection in non-competitive markets supplying to vulnerable consumers. Informing consumers so that they can, for example, choose between 972% and 1300% interest per annum is hardly robust consumer protection. Likewise, assessment of capacity to repay is unlikely to be able to be used to challenge lending contracts where only a few hundred dollars are being loaned.
The critical issue, of course, is the cost of credit — this requires capping the (in effect) interest that pay day lenders can charge. The Code changes do not introduce a national interest rate cap of 48% on pay day lending. A cap of 48% applies only in New South Wales, Victoria and the Australian Capital Territory. To that extent, comments made by Merri Rose, Queensland Minister for Tourism, Racing and Fair Trading, are promising. The Minister has stated that she has ‘received unanimous support from interstate colleagues for a proposal to cap interest rates and fees chargeable by fringe credit providers’. The Minister has further noted that this ‘proposal to cap fees and charges will shut the door on fringe credit providers who proposed to use this avenue to avoid interest rate caps’.
The position in Victoria and the Australian Capital Territory is currently unclear. As stated, in both of these jurisdictions an interest rate cap of 48% applies. Nonetheless, neither jurisdiction has passed separate legislation to clarify that all credit fees and charges under a pay day loan contract are to be included for the purposes of calculating the maximum interest rate of 48%. It does, however, appear arguable that the cap is intended to apply to the maximum cost of credit thus meaning that pay day lenders’ fees (they charge no interest as such) is the cost of credit from a lender and should not exceed, expressed as an annualised interest rate, 48%. It is likely that this will need to be resolved by test case litigation. A more sensible approach has been adopted in New South Wales, where the maximum annual percentage rate of interest (48%) is to be calculated on the basis of interest and all credit fees and charges under the contract.
Since the late 1970s, there has been a revival of what is variously called ‘free-market’ or ‘libertarian’ economics and political philosophy, whose basic political premise is that state intervention is a bad thing. The proponents of these views appear to make the basic … assumption that the free market is always the most effective regulator, which in the long run produces the most beneficial effect for consumers and society as a whole.
There is no doubt that one of the dominant public policy themes of the last ten years has been industry self-regulation. The federal government has a strong commitment to market-based mechanisms to protect consumers.
The government encourages businesses to regulate themselves rather than rely on the government to do it for them. Effective self-regulation has the potential to achieve greater and lasting improvements in business practices by using negotiation and consultation rather than prescriptive legislation and enforcement. Consumers can benefit from a greater focus by business on customer service and on being responsible for its behaviour.
What happens, however, when business will not be responsible for its own behaviour? There has been, for example, widespread criticism of the telecommunications and banking industries for failing to meet their perceived responsibilities — especially in light of their profitability. Dissatisfaction with the self-regulating telecommunications industry has recently caused major consumer organisations to boycott the Australian Communications Industry Forum — the industry body responsible for self-regulation. Despite sustained criticism that industry self-regulation fails consumers, it remains the policy tool of first choice for mainstream businesses. That this is the case is unfortunate. Self-regulation is premised on the basis that industry is best placed to be profit-maker and consumer protector — at the same time. It is little wonder that self-regulating industries rarely achieve anything approaching a fair balance of these two competing demands.
What of those industries whose core business is inherently irresponsible? In these industries, the rhetoric of corporate citizenship, triple bottom line, good governance, and sustainability becomes meaningless. Might we expect governments, despite their commitment to ‘light-handed’ regulation, to act decisively in protecting consumers from such industries?
The only government-commissioned report on pay day lending, the Queensland Government Report, recommended that pay day lending be regulated by the Code. It recommended against an outright ban on pay day lending. The report recommended that the maximum interest rate cap of 48% (often referred to as the usury cap) not be extended throughout Australia. Indeed, it recommended that uniformity be achieved by removing the cap in Victoria, New South Wales and the Australian Capital Territory on the basis that ‘it is preferable to leave interest rates to the market to determine’. It states:
The working party notes New South Wales and Victoria both have 48% ceilings on interest rates. The New South Wales provisions are to the effect that the credit provider is precluded from recovering interest above 48%. The Victorian provisions are to the effect that the whole contract is unenforceable if the interest rate exceeds 48%. Obviously, these ceilings will have a profound effect on pay day lenders operating in those States if pay day lending is regulated by the Code. The working party notes the overriding objective of the Code is uniformity. The working party believes that in order to maintain uniformity, New South Wales and Victoria should review those ceilings. If pay day lending becomes regulated by the Code, the maintenance of those ceilings will spell the death to the pay day lending market in Victoria and New South Wales.
The Queensland Government Report presents two major justifications for this extraordinary diminution of basic protection for vulnerable consumers by allowing pay day lenders to regulate their own interest rates. First, that ‘[p]ay day loans offer a service that is in demand in the market place … [t]hose consumers should, subject to some safeguards, be free to obtain a pay day loan if they so choose’.
The promoters of pyramid selling schemes, for example, invariably protest that consumers need and like their services and that consumers are entitled to ‘choose’ to use their services. By, on the one hand, regulating pay lenders but, on the other hand, removing interest rate caps, the Queensland Government report recommended legitimising credit at any cost.
Second, the Queensland Government Report raised the spectre of a worse alternative.
[I]f pay day lending was prohibited, where would people who cannot get mainstream finance go for a loan? The working party is conscious of not inadvertently encouraging loan sharks to fill any void created.
An obvious response is that pay day lenders are, by any reasonable measure, loan sharks. The sort of loan sharks the report writers presumably had in mind are those that charge high rates (although not nearly as high as pay day lenders) but also use coercion and violence to collect loans. Unfortunately, the report presents no evidence for this supposition. It is just as likely that those people using pay day lenders were previously using pawnbrokers and other forms of fringe credit, rather than ‘loan sharks’. In any event, it is hardly appropriate to force a demonstrably exploitative, unscrupulous practice on the most vulnerable consumers in the community because there is a worse alternative.
The recommendations of the Queensland Government Report for a ‘light-handed’, market-based approach to pay day lending have not been (nor are they likely to be) followed. The initial response to pay day lending, and the current regulatory uncertainty that exists, have focused attention on the extent to which Australian governments, at least without considerable lobbying pressure, are prepared to abrogate their responsibility to protect consumers from exploitative market behaviour. Surely it is obvious that a light-handed approach to loan sharks is an absurd policy torpor that does not befit a civil society?
It appears likely that the growth of pay day lending has been driven by a demand for short-term cash by low and fixed-income consumers, including the working poor. Pay day lending is not an appropriate answer to the demand for short-term loans. A proper response lies in ensuring that the growth and change in demand for short-term loans can be met by a non-exploitative supply for people in poverty.
Despite social obligations, corporate citizenship and triple bottom line, banks do not provide low-income people with short-term credit, nor do they provide them with fee-free basic banking. Banks ought to provide what the public demand and they can clearly afford — in the last five years the four major banks made a combined profit of approximately $40 billion. The lack of preparedness of Australia’s major banks to offer low-cost credit to low-income consumers allows fringe credit providers to develop and multiply.
Another aspect of the relationship between pay day lenders and banks is direct debit. As discussed above, pay day lenders use direct debit as a form of payment ‘guarantee’. If the direct debit ‘bounces’, that is, there is no money in a customer’s account at the time of presentation of the direct debit authority, banks charge a ‘penalty’ fee. These fees vary, but a fee of $35 is typical. It is not unknown for consumers to be charged a series of these fees over a short period of time, amounting to hundreds of dollars.
Pay day lending is a highly exploitative practice. Ralph Nader summarises pay day lending this way: ‘Unscrupulous businesses keep thinking up ever more creative ways to defraud people’. Far from offering a sustainable answer to problems of poverty, they capture people in debt traps, exacerbating their already precarious financial position.
Despite the initial lack of willingness to protect consumers displayed in the Queensland Government Report and the shortcomings of the recent regulatory changes, those changes are very likely to make pay day lenders commercially unviable in the major jurisdictions of New South Wales and Victoria. Proposed additional Code changes are likely to extend this outcome throughout Australia. This, it can be argued persuasively, is appropriate for businesses that exploit vulnerable consumers by offering credit at exorbitant cost. The far greater challenge for policy advocates, government and mainstream financial institutions will be to create commercially viable, non-exploitative short-term cash options for those vulnerable consumers who are currently at the mercy of loan sharks and rank market opportunists.
[*] Chris Field is Executive Director, Consumer Law Centre Victoria.This is an expanded version of a paper presented on 11 October 2001 at the VCOSS Social Policy Congress held in Melbourne on 10–12 October 2001.© 2002 Chris Field (text)© 2002 Jane Cafarella (cartoon)
 We are now one of the most unequal countries in the Western World: Colebatch, Tim, ‘Income Divide Widening, World Study Finds’, Age, 27 January 2001, p.3.
 Robinson, Paul, ‘The Gulf Widens, The Myth of a Fair Society Shatters’, Sunday Age, 4 February 2001, p.4.
 Robinson, above, ref 2, p.4.
 Field, Chris, Lowe, Catriona and Osboldstone, Glenn, ‘A Good Serve — What Effect has the Goods and Services Tax had on Low-Income and Vulnerable Consumers?’, (2001) May/June Consumer Rights Journal at 11. Caskey has argued that the expansion of fringe credit providers (particularly pawnbrokers and cheque-cashing outlets) could be attributed to broader socio-economic changes: Caskey, John, Fringe Banking – Check Cashing Outlets, Pawnshops and the Poor, Russell Sage Foundation, New York, 1994. Unemployment and declining real wages impact upon the demand for short-term credit, see Ramsay, Iain, ‘Access to Credit in the Alternative Consumer Credit Market’, Office of Consumer Affairs, Industry Canada/Ministry of the Attorney- General, 2000 <http://www.strategis.ic.gc.ca/pics/ca/ramsayen.pdf> p.3.
 Pay Day Lending — A Report to the Minister for Fair Trading, <www.consumer.qld.gov.au/scripts/publications.exe> p.14. One author has written about her own experience of borrowing $200 over a period of two weeks for a total fee of $74.50. The effective annualised interest rate for this transaction, the author suggests, is 972%: Petschler, Louise, ‘How to borrow @ 972%’, (2001) 86 Consuming Interest at 6. Pay day lenders here and overseas do not accept the conversion of fees charged to interest rates, principally on the basis that loans are short-term — not for 12 months or longer: Pay Day Lending — A Report to the Minister for Fair Trading, p.12. This does not take into account, however, that consumers often roll over their loans, nor that annualised rates are the accepted way for the cost of credit to be described. Pay day lenders have also suggested that, even if annualised rates were appropriate, the true figure would be 250%: Bryant, Rob, ‘Pay Day Lending Industry Booming’, AM, 5 September 2001. Transcript available at <www.abc.net.au/am/s358431.htm>.
 McIlveen, Luke, Milligan, Louise, and Leech, Graeme, ‘Crackdown on Pay Day Loan Sharks’, Australian, 4 April 2001, p.4.
 Petschler, Louise, above, ref 5, p.8.
 See, for example, the Illinois Department of Financial Institutions, Short Term Lending Final Report 2000 at 26 available at <www. state.il.us.dfi/shorterm>.
 Information attained by the author in a number of interviews/ conversations with community-based financial counsellors and consumer support workers. In particular, the author thanks Phil Lennon and Jackie Galloway for the information that they have generously provided.
 Illinois Department of Financial Institutions, above, ref 8, p.26.
 Nader, Ralph, ‘Legal Loan Sharking’, 1 September 1999 from his nationally syndicated newspaper column, In the Public Interest.
 Information reported to the author, above, ref 9; Merri Rose, Queensland Minister for Tourism, Racing & Fair Trading has stated ‘[a] customer obtained a $50 pay-day advance to be repaid in two weeks. This was ‘rolled over’ with the amount outstanding increasing each time, until 10 months later, the consumer owed $900. So the $50 pay-day advance ended up attracting a fee of $192 a fortnight’, Media Release, 9 December 2001.
 Fox, Jean Ann, The Growth of Legal Loan Sharking — A Report on the Payday Loan Industry, Consumers’ Federation of America, November 1988, p.5; Ramsay, Iain, above, ref 4.
 Petschler, above, ref 5, p.8.
 Syvret, Paul, ‘The Quick and the Debt’, The Bulletin, 6 February 2001, p.30.
 It is evident that these items of collateral are used from pay day lending contracts (clients names and other identifying material deleted) provided to the author by Phil Lennon, Financial Counsellor. Merri Rose, Minister for Tourism, Racing & Fair Trading has stated ‘she was aware of a couple … [that] just two days after their repayment was due, the lender repossessed their car … The lender then demanded an extra $500 in repossession and ‘late’ fees before the consumer could get the car back’: Merri Rose, above, ref 12.
 Pay Day Lending — A Report to the Minister for Fair Trading, above, ref 5, p.5.
 Butler, Danny, ‘Payday Lenders Take Extra $48m’, Herald Sun, 5 September 2001, p.4. The figures quoted in the article were provided by the author.
 Pay day lending began in the United States, where it has grown from being virtually unheard of in the early 1990s to an industry of between 8000-10,000 lenders with a turnover in the multiple billions: Woodstock Institute Alert, March 2001, Number 16 available at <www. woodstockinst.org>.
 ‘The group operated a chain of almost 70 franchised stores through Australia and New Zealand at its peak’: ‘Bond rejects blame for failure of financial group’, 11 December 2001, AAP. Interestingly, Alan Bond is alleged to have played a part in the downfall of the group. The infamous businessman allegedly reneged on purchasing the UK franchise rights to the group for $1m. ChequEXchange director, Alan Endresz states in the same article ‘[w]e certainly would not have gone into liquidation if he [Bond] had paid us the money’.
 Meetings were held throughout the early part of 2001 and involved representatives of, among others, the Australian Consumers’ Association, Consumer Credit Legal Service (Vic), Consumer Credit Legal Centre (NSW), Financial and Consumer Rights Council Victoria, Queensland Legal Aid, Redfern Legal Centre, Good Shepherd Youth and Family Service, Consumer Law Centre Victoria, and a number of other consumer advocates including Fiona Guthrie. The author was present during these meetings.
 ‘[S]o as to result in its practical prohibition’: Stutsel, Matthew, ‘Mandatory Comparison Rates and Pay Day Loans’, (2001) September–November Commercial Law Quarterly at 10. Pay Day Lending — A Report to the Minister for Fair Trading, above, ref 5 at iv recommends against banning pay day lenders.
 See, for example, Hockey, Joe, Commonwealth Minister for Financial Services and Regulation, ‘Action needed on pay day lending’, Media Release, 3 April 2001, describing the lenders as part of the ‘twilight zone of Australian finance’ and Watkins, John, New South Wales Minister for Fair Trading, ‘NSW leads the way on pay day lending’, Media Release, 3 April 2001. Minister Watkins described pay day lenders as ‘bottom feeders that charge crippling interest rates’. The protest was reported extensively in print, radio and television media, see, for example, McIlveen, Luke, Milligan, Louise, and Leech, Graeme, above, ref 6.
 Giddings, Jeff, ‘Casework, Bloody Casework’, 17(6) Alt.LJ 261 at 262. The campaign against finance company AVCO is one example of the past work of the national consumer movement.
 Giddings, Jeff, above, ref 24, p.265.
 Consumer Credit Code, s.7(1).
 Rose, Merri, Queensland Minister for Tourism, Racing and Fair Trading, Green Light for Loan Shark Charges Cap, Media Release, 13 July 2001. For a more detailed analysis see Bingham, Paul and Niven, David, Credit Handbook, Leo Cussen Institute at 21.
 The Consumer Credit Amendment Regulation 2001 have introduced two further changes. The first will exempt banks from the operation of the amended s.7(1) as the Code changes are not intended by government to affect bank fees. The second lowers, from $200 to $50, the amount of credit where the Code does not apply. Pay day lenders sometimes lend amounts of less than $200 (though rarely less than $50).
 ‘From tomorrow: lenders will have to tell borrowers the fees and charges that are payable, whether security is required and the terms of the loan; loan contracts have to be in writing and lenders will be required to give a copy to the borrower; lenders will also be required to assess whether borrowers have the capacity to repay the loan; if it can be established later it was clear they had no capacity to repay the loan, the borrower has the legal right to walk away from the contract and all fees, including interest, will be waived and/or refunded.’ Merri Rose, Minister for Tourism, above, ref 12.
 The position in New South Wales, Victoria and the Australian Capital Territory is discussed next. The regulatory position in Tasmania is different. By operation of the Payday Lenders Moratorium Act 2001, pay day lending in Tasmania was effectively banned. The Act expires on 1 December 2002.
 Rose, Merri, above, ref 12.
 Based on a significant number of contracts viewed by the author.
 Rose, Merri, above, ref 27. ‘Debtors ‘necessities of life’ will be protected under the proposed laws with ‘blackmail security’ laws making it illegal to sell up essential household items.’ and ‘We want to stop these people giving loans to high-risk customers and then using the beds, fridges, cutlery, kids’ toys etc as security.’: Rose, Merri, above, ref 12.
 Rose, Merri, above, ref 27. The Western Australian Government has introduced the Consumer Credit (Western Australia) Amendment Bill 2001 that will provide ‘in the case of a short term credit contract, the regulations may require interest charges and all credit fees and charges under the contract to be included for the purpose of calculating the maximum annual percentage rate under the contract’: s.4. The government has stated that it ‘is currently considering setting a total cost of credit maximum of 48 per cent for short-term credit’: Griffiths, N., W.A. Minister for Racing and Gaming, Second Reading, Consumer Credit (Western Australia) Amendment Bill 2000, Hansard of the Legislative Council, 20 September 2001.
 By the operation of the Consumer Credit (New South Wales) Amendment (Pay Day Lenders) Act 2001.
 Goldring, Maher, McKeough, Pearson, Consumer Protection Law, Federation Press, 1998, p.4.
 For an overview and analysis, albeit a highly unsatisfactory one, see Taskforce on Industry Self-Regulation, Industry Self-regulation in Consumer Markets, August 2000.
 A statement by the (then) Commonwealth Minister for Consumer Affairs, Warren Truss in ‘Foreword’, Department of Industry, Science and Tourism, Codes of Conduct — Policy Framework, March 1998, p.1.
 For a strong account of market failure in the banking industry see, Connolly, Chris, and Hajaj, Khaldoun, Financial Services and Social Exclusion, Financial Services Consumer Policy Centre, University of New South Wales, March 2001. Despite initiatives such as the Banking Code of Practice, consumer advocates argue that self-regulation in the banking industry has not ensured adequate consumer protection.
 Consumers’ Telecommunications Network, Small Enterprise Telecommunications Centres Limited, Australian Consumers’ Association and Consumer Law Centre Victoria, Consumer Groups Announce Boycott of Telco Self-regulatory Group, Media Release, 3 December 2001. For a study of the practical effect of self-regulation on market behaviour see Communications Law Centre, Unfair Practices and Telecommunications Consumers, January 2001. I have argued that self-regulatory instruments, such as self-regulatory Australian Communication Industry Forum codes have failed consumers. See, for example, Field, Chris, ‘In the Public Interest — Assessing the Effectiveness of Codes of Practice and ADR Schemes’, (2000) May/June Consumer Rights Journal at 9.
 Put another way, ‘[w]e do not accept that, as a general rule, self-regulation as the only or principal form of consumer protection is effective or desirable … it sets up the suppliers or producers of the commodity as judges in their own cause and makes it likely that the balance of any scheme of self-regulation will favour the suppliers rather than the consumers: such is human nature’: Goldring and others, above, ref 36, p.13.
 There is considerable thinking on these concepts that cannot be afforded adequate coverage here. It is worth noting, however, the limitations of triple-bottom line and corporate responsibility. Most businesses operate their core business measured against a financial bottom line. Peripheral activities meet ‘social obligations’. For example, the core business of banks — providing financial services — is measured almost exclusively against a financial bottom line. This justifies unfettered staff redundancies, fee increases and branch closures — all measures fiscally responsible and socially irresponsible. Banks donate money to charities and suggest this is a part of their social obligation. What is needed is for these non-financial threads to be woven into core business operation. Corporate responsibility should also be measured in terms of the length to which industry will go to avoid regulation by restructuring operations whilst effectively providing the same core product or service. Iain Ramsay has argued that it is a characteristic of the alternative credit market to restructure their operations to avoid regulation. Ramsay, Iain, above, ref 4, p.28.
 Pay Day Lending — A Report to the Minister for Fair Trading, above, ref 5, p.iv.
 Pay Day Lending — A Report to the Minister for Fair Trading, above, ref 5, p.30.
 Pay Day Lending — A Report to the Minister for Fair Trading, above, ref 5, p.30
 Pay Day Lending — A Report to the Minister for Fair Trading, above, ref 5, p.30. The report also observes that ‘there would be competition policy implications for an outright ban and the policy would be difficult to defend’, p.30. Pay day lenders state that pay day lending, or micro-lending as they prefer to call it, provides a welcome and needed service to consumers. Petschler, Louise, above, ref 5. p.7.
 Pay Day Lending — A Report to the Minister for Fair Trading, above, ref 5, p.30.
 For an account of these types of loan sharks see Queensland Office of Equity and Fair Trading, ‘Fringe’ Credit Provider — A Report and Issues Paper, May 1999. Interest rates of 150%-240% per annum were reported.
 In addition to commercially viable low-interest loan schemes, it is also important that we examine the effectiveness of no interest loan schemes and consider a significant expansion of these schemes. One of the architects of these schemes sets out their virtues in Hahn, Barry, ‘No interest loans — more than just a good idea’, 1 Consumer Rights Journal 1, November/December 1996 at 12. The website of the New South Wales Council of Social Service sets out a significant amount of information on these schemes <www.ncoss.org.au>. Of course, the underlying drivers of poverty must be tackled, including the adequacy of fixed income payments, health, education, job opportunities and levels of wages.
 Connolly, Chris, and Hajaj, Khaldoun, above, ref 39, p.23. For an account of banks re-investment in the communities in which they operate, including proving low-interest loans, see Beddoe, Kate, ‘The Long Kiss-off’, (2000) Summer Consuming Interest at 8.
 Syvret, Paul, above, ref 15, p.30.
 The legality of ‘penalty’ fees charged by banks warrants much closer consideration. It is arguable that these fees are not a genuine pre-estimate of the loss that a bank or financial institution suffers as a result of a default/breach by the consumer, but really amount to penalties. Such penalties, extravagant in amount compared to the actual cost of dealing with the default and designed to intimidate consumers into contractual performance, are unenforceable: Dunlop Pneumatic Co. Ltd v New Garage & Motor Co Ltd  UKHL 1;  AC 79 and O’Dea v Allstates Leasing System (WA) Pty Ltd  HCA 3; (1983) 152 CLR 359. A study by the Consumers’ Federation of America, for example, found that cheque dishonour fees in the United States comprised up to a 90% profit margin: Shields, J., Bounced Checks, Billion Dollar Profits, Consumers’ Federation of America, 1998. There appears to be growing momentum for fees to be levied at cost-recovery, as opposed to cost recovery and a (often lavish) profit margin: Reserve Bank of Australia, Reform of Credit Card Schemes in Australia, Media Release, 14 December 2001 that states ‘[t]he proposed reform measures [to credit cards] involve … an objective, transparent and cost-based methodology for determining wholesale (‘interchange’) fees’.
 Based on information gathered from the casework practice of the Consumer Law Centre Victoria.
 Nader, Ralph, above, ref 11, p.12.