New Consumer Protections for Payday Loans in 2025: What Changed and What It Means for Australians
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CashPal TeamLast updated 7 October 2025
New consumer protections for payday loans in 2025
Australia tightened the screws on harmful short-term lending in 2025. The year didn’t rewrite the fee caps for small amount credit contracts, but it did sharpen enforcement, close avoidance paths, and bring related credit products into the same regulatory tent. Payday lenders have less room to push customers into unsuitable loans or charge non-permitted fees, consumers have clearer avenues for redress, and most adjacent providers now need a licence and proper credit checks.
The baseline rules
A small amount credit contract up to $2,000 can include an establishment fee up to 20% of the amount borrowed and a monthly fee up to 4%; interest is otherwise prohibited. Lenders must make reasonable inquiries and verify a loan won’t be unsuitable, rollovers and rescheduling tricks are restricted, and every lender must hold an Australian Credit Licence and belong to the external dispute resolution scheme. 2025 didn’t change the dollar caps — it changed behaviour through enforcement, court rulings, and an expanded licensing perimeter.
What changed in 2025
Regulators took three decisive steps that now shape the market.
Non-permitted fees confirmed unlawful
The Federal Court affirmed that charging extra for rescheduling or extending a small amount credit contract breaches the law. If a fee is not expressly allowed in the Credit Code for these loans, the lender cannot charge it.
ASIC warned against product steering
ASIC’s review found some providers tried to move customers from payday loans into medium amount contracts ($2,001–$5,000), which don’t carry the same strict cost structure. Using product switching to avoid safeguards breaches design and distribution and responsible lending obligations.
BNPL brought under credit licensing
From 10 June 2025, buy now pay later sits under the credit licensing regime — providers must hold a licence, comply with credit assessment requirements, follow distribution obligations, and give customers hardship processes and access to external dispute resolution.
How these measures protect consumers
- Prohibited fee deterrence — the court rulings eliminate grey-area pricing such as extension, rescheduling or administrative fees. Borrowers who suspect they were charged such fees now have strong precedent to challenge them.
- Tighter suitability enforcement — ASIC’s warning pushes lenders to improve affordability checks and verification of income and expenses.
- Fewer avoidance paths — the perimeter change for low cost credit removes the incentive to funnel borrowers into products that used to sit outside the Credit Act.
What to check before you sign
Use this approach before you sign any agreement.
- 1
Confirm licensing
Confirm the lender is licensed and listed on the ASIC register, and that they’re a member of AFCA. If either is missing, walk away.
- 2
Ask for the total
Ask for the total repayable amount and the schedule — for small amount credit contracts you should only see the establishment fee, the monthly fee, and a capped default fee.
- 3
Provide full information
Give complete income and expense information. If the process feels too light, that’s a red flag.
- 4
Check for banned fees
Watch for any mention of extension or rescheduling fees — these are not allowed for payday loans.
- 5
Consider alternatives
Many banks and credit unions offer low cost short term options, and charities can assist with no interest loans for essentials.
The role of CashPal in the current loan economy
CashPal is a licensed Australian lender offering personal loans and payday loans. We operate under the Credit Act, hold an Australian Credit Licence, and are a member of AFCA. Our products comply with the small amount credit contract fee caps, and our assessment follows the responsible lending framework reinforced through 2025 enforcement. If a customer experiences difficulty, we provide hardship support in line with the law — the standard customers should expect from any provider in 2025.
Warning signs for consumers
Claims that a payday loan can be extended indefinitely for a small fee
Applications that don't require recent bank statements or proof of expenses
Advice to refinance a payday loan into a larger loan without a fresh assessment
Frequently asked questions
Did 2025 change the caps on payday loan fees?+
No. The 20% establishment fee and 4% monthly fee structure remains. What changed is enforcement — courts confirmed lenders cannot add extension or rescheduling fees, giving a cleaner, more predictable total cost.
Do lenders have to run full credit checks on every borrower now?+
Yes. Responsible lending obligations require lenders to verify income and expenses and assess suitability, and the 2025 regulatory focus has made this a practical necessity.
Can a lender move me from a payday loan to a larger loan to keep me as a customer?+
Only if it is suitable and properly assessed. Regulators have warned against product switching that reduces consumer protections.
What changed for buy now pay later in 2025?+
From 10 June 2025, BNPL sits under the Credit Act with licensing, credit checks, hardship rights and access to AFCA — reducing arbitrage between it and payday products used by the same households.
What should I do if I was charged an extension fee?+
Ask the lender to remove it and refund any amount already paid. If they refuse, lodge a complaint with AFCA and report the issue to ASIC, keeping copies of your contract and communications.
Where can I get independent help if I am in hardship?+
Contact a financial counsellor through the National Debt Helpline, speak with your utility provider about payment plans, or consider a no interest loan through eligible community organisations.
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