Meloan

Written by James Riley | Reviewed by MeLoan Team | Last Updated: February 3, 2026

ASIC has been clear about its direction in payday lending. It’s focused on whether lenders are writing unsuitable loans, pushing borrowers into contracts with fewer protections, and using business models that sidestep the rules that apply to small amount credit contracts. The clearest public signal is ASIC’s Report 805, which reviewed SACC lending practices from December 2022 to August 2024 and was released on 13 March 2025.

This guide translates ASIC’s focus areas into plain-English risks and practical checks you can use before you apply.

The Short Version of ASIC’s Focus

ASIC is watching for harm, not hype. In practice, that means:

Affordability checks that don’t match real life, where repayments only work if the borrower cuts essentials or runs into hardship.
Switching behaviour, where a borrower who applies for a protected product ends up steered into a bigger or more complex product.
Target market failures under Design and Distribution Obligations (DDO), where products are sold outside the right target market.
Avoidance conduct, where a structure looks designed to get around SACC protections.
Referral pathways and lead selling, especially when declined applicants are pushed into products outside the National Credit Code.

What Changed After the 2022 to 2023 Reforms

ASIC’s review observed a structural shift in the sector after reforms that commenced in December 2022 and June 2023.

A move away from SACCs and toward larger contracts

ASIC observed:

A reduction in the number of small amount credit contracts (SACCs).
An increase in the number of medium amount credit contracts (MACCs).
A rise in the total number of missed repayments for MACCs, alongside a decline in missed repayments for SACCs.

ASIC’s snapshot also noted that the total value of small and medium amount credit contracts provided to consumers in the 2023–24 financial year was $1.3 billion.

SACC vs MACC

Item	SACC	MACC
Typical limit band	Up to $2,000	More than $2,000 (and within MACC limits)
Why it matters	Has extra consumer protections	Different rule set and borrower risks can change
Risk ASIC flagged	Borrowers being moved into products with fewer protections	Higher missed repayments observed in ASIC’s data

The Key Areas ASIC Is Scrutinising

Unsuitable contracts and weak affordability checks

Responsible lending is not optional. Before entering a credit contract, lenders must assess whether the loan is unsuitable because the consumer is likely to be unable to make repayments, or could only make them with substantial hardship, or the loan does not meet the consumer’s requirements and objectives.

ASIC’s concern is practical: if a lender’s process is designed to approve rather than assess, it’s more likely to produce loans that don’t fit the borrower’s situation.

Steering borrowers into contracts with fewer protections

One of ASIC’s clearest warnings is about lenders attempting to move vulnerable consumers into contracts with fewer protections.

ASIC observed behaviours that can create this outcome, including:

Offering alternative credit products to people who applied for a SACC but were ineligible because of the protected earnings rule
Pushing loan sizes just above the SACC threshold (for example, in the $2,001 to $2,500 band)
Offering continuing credit contracts (open-ended revolving credit) to borrowers who appear to have been SACC users

ASIC’s point is simple. If you apply for one type of credit for a specific need, then end up being nudged into a different product, the lender needs to be able to justify that it still matches your needs and is understandable for you.

Target market failures under DDO and weak TMD controls

ASIC has also flagged concerns around lenders’ Target Market Determinations (TMDs). The issue is whether lenders are defining the right target market and setting review triggers that detect when products are being distributed outside that market.

If a lender changes products after reforms, ASIC expects them to adjust their TMDs to reflect the new product design and the borrower cohort it’s aimed at.

Avoidance business models

ASIC is watching for models that appear designed to avoid SACC protections. The prohibition is broad and focuses on whether a scheme has an avoidance purpose.

ASIC highlights factors that can point to avoidance purpose, including whether:

the structure is more complex or costly than a SACC would have been
advertising looks similar to SACC advertising
marketing targets the same groups that were targeted for SACCs

You don’t need to be a lawyer to use this. If a product feels like a SACC but is structured to dodge SACC protections, that is exactly the kind of conduct ASIC has said it will be concerned about.

Proscribed referrals and lead-generation pathways

ASIC is watching what happens after a borrower is declined.

SACC lenders must not refer a consumer if the referral is likely to result in the consumer entering a credit contract or arrangement where the credit is not regulated by the National Credit Code.

ASIC observed that some lenders refer declined applications to external platforms that match loan applications with credit licensees. ASIC’s expectation is that lenders should not just rely on contracts with third parties. They should have governance controls and should audit the practices of lead purchasers.

Unsolicited communications that prompt repeat borrowing

A key reform is a ban on lenders making unsolicited communications to current or previous SACC consumers or applicants that include offers or invitations to apply for such loans.

ASIC noted that all five lenders in its sample group stopped sending offers inviting their consumer base to apply for a SACC. The underlying principle matters to borrowers: applying should be your choice, not the result of a lender prompt.

Repayment and fee compliance, plus back-to-back contracts

ASIC highlights several rules designed to prevent cost blowouts and pressure borrowing.

Examples include:

repayments and the intervals between repayments generally need to be equal for SACCs
lenders can’t require or accept monthly fees for a month that starts after the loan has already been repaid

ASIC also flagged concern about consumers entering back-to-back credit contracts, which can increase the risk of consumer harm.

Protected earnings rule (income cap)

ASIC points to the revised protected earnings regime that limits SACC repayments. In plain terms, a lender must not enter into a SACC if total repayments (across the borrower’s SACC loans) would exceed 10% of the borrower’s net income.

ASIC also noted the prior setting was 20% of gross income, and that the newer setting further limits the share of income that can be used for repayments.

What Borrowers Should Watch For Before Applying

The goal is to avoid being pushed into a product you can technically be approved for, but can’t realistically repay.

Practical red flags

You apply for a SACC or a smaller loan, then you’re encouraged to take a larger amount or a revolving credit line.
Your loan amount is pushed just above $2,000 with a short repayment period that feels tight.
The lender’s questions don’t match your real spending, or the assessment feels like a box-tick exercise.
You’re offered a new product type as soon as you fail a SACC eligibility test.
A declined application leads to immediate “next option” offers via a third-party platform.

ASIC Focus Area vs what it looks like vs what you can do

ASIC Focus Area	What It Can Look Like in Practice	What to Do Before You Accept
Unsuitable lending	Repayments only work if you cut essentials or take another loan	Stress test your budget honestly and check what happens if an expense spikes
Product switching	SACC application becomes a larger loan, MACC, or revolving credit offer	Ask why the new product matches your stated need and get the terms in writing
DDO and TMD failures	Same product sold to very different borrower situations	Look for clear eligibility explanations and avoid vague “fits most people” claims
Avoidance conduct	A SACC-like offer structured to avoid SACC protections	Compare total cost, complexity, and who it’s marketed to
Proscribed referrals	Declined applicants funnelled to offers outside the Credit Code	Ask who you’re being referred to and whether the product is regulated
Unsolicited prompts	Repeat borrowing offers that create pressure	Treat repeated invitations as a warning sign and pause before you re-borrow
Fee and repayment issues	Back-to-back loans, odd fee timing, or repayments that don’t look consistent	Check fees carefully and be cautious of structures that extend costs

If Something Goes Wrong

If you believe a loan was unaffordable or you were pushed into a product that didn’t match your needs, act quickly.

Ask the lender for hardship support if you can’t meet repayments.
Request the lender’s internal dispute resolution (IDR) process and put your complaint in writing.
If it isn’t resolved, escalate to AFCA.
Get free support from the National Debt Helpline if you need a plan, negotiation help, or you’re under pressure.

Glossary

Term	Meaning
ASIC	Australian Securities and Investments Commission
SACC	Small amount credit contract (commonly called payday loans)
MACC	Medium amount credit contract
DDO	Design and Distribution Obligations
TMD	Target Market Determination
Proscribed referral	A prohibited referral that is likely to lead a consumer into unregulated credit
Avoidance conduct	Structuring or behaviour intended to avoid SACC protections
Continuing credit contract	Revolving, open-ended line of credit rather than a fixed term loan

FAQs

What is ASIC most concerned about in payday lending?

ASIC has flagged concern about unsuitable lending, borrowers being moved into contracts with fewer protections, failures in target market and distribution controls, and business models that appear designed to avoid SACC protections.

What’s the difference between a SACC and a MACC, and why does it matter?

A SACC is in the payday loan category and comes with extra consumer protections. A MACC is a different type of regulated credit contract, and ASIC observed higher missed repayments for MACCs in the data it reviewed.

Why is ASIC focused on borrowers being moved into larger or different products?

Because the borrower applied for a specific need and may end up in a product that doesn’t match their requirements and objectives, or exposes them to greater cost and risk.

What should I do if I think a loan is unaffordable?

Ask for hardship support straight away, lodge a complaint through the lender’s internal dispute resolution process, then escalate to AFCA if the lender doesn’t fix it.

Are referral platforms a problem on their own?

Not automatically. ASIC’s concern is when referral pathways increase the risk that declined borrowers are funnelled into unregulated credit, and when lenders rely on contracts with third parties without governance and auditing.

Sources

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What ASIC Is Watching in Payday Lending in Australia