Usury—the act of charging excessive interest on loans—has shaped financial regulations for centuries. In 2025, with Australia’s credit market evolving and new policy reforms in place, understanding usury is crucial for anyone borrowing or lending money. Whether you’re considering a personal loan, a business credit facility, or simply curious about payday lenders, here’s what you need to know about usury laws, how they protect Australians, and where the rules are heading next.
What Is Usury and Why Does It Matter?
Usury isn’t just an old-fashioned term. At its core, it’s about preventing predatory lending. Australian law defines usury as lending money at interest rates above a legal maximum, aiming to protect borrowers from debt traps and financial exploitation. The concept dates back to ancient times, but today’s concerns are anything but historical: with the rise of fintech lenders and buy-now-pay-later services, the debate over what constitutes a ‘fair’ rate is more relevant than ever.
- Legal limits: States and territories set caps on the maximum allowable interest rate. For example, NSW and Victoria enforce a 48% per annum cap on the combined interest and fees for most consumer loans.
- Who is covered? Most consumer credit products, including payday loans, personal loans, and credit cards, fall under these rules, but some business loans and informal agreements may not.
2025 Policy Updates: A New Era for Borrower Protection
This year, the Australian government has introduced several changes affecting usury regulations and lending practices:
- Interest Rate Cap Review: The federal government’s 2025 review reaffirmed the 48% cap, but also clarified how it applies to bundled fees, late charges, and non-traditional lenders.
- Expanded ASIC Powers: ASIC now has more authority to investigate and prosecute lenders who disguise excessive costs as fees rather than interest, closing common loopholes used by payday lenders.
- Digital Lending Transparency: New digital disclosure requirements mean online and app-based lenders must display total costs—including all interest and fees—upfront, so borrowers can compare offers more easily.
These reforms reflect a broader global trend toward stronger consumer protection and increased scrutiny of high-cost, short-term lenders.
Real-World Impacts: Who Wins and Who Loses?
The modern crackdown on usury is reshaping the lending landscape for Australians:
- Consumers: Borrowers now face fewer risks of falling into debt spirals. For example, a Victorian family that once relied on payday loans at 60%+ effective interest now benefits from capped costs and clearer loan terms.
- Lenders: Legitimate lenders are adapting by streamlining operations and focusing on transparency, while some fringe operators have exited the market or shifted focus to business loans (where caps may differ).
- Fintechs and BNPL: Buy-now-pay-later platforms, previously outside the usury net, now face stricter scrutiny if their fees mimic high-interest lending. Some major BNPL providers have adjusted their business models in response.
Despite these wins, critics argue that strict caps can reduce access to small, short-term loans for people with poor credit, potentially pushing them toward unregulated lending channels. The government is monitoring these unintended consequences closely in 2025.
What Borrowers Should Watch For in 2025
Whether you’re taking out a loan or considering a new credit card, keep these tips in mind:
- Check the true cost: Don’t just look at the advertised interest rate—ask for a breakdown of all fees, charges, and the total annual percentage rate (APR).
- Know your rights: If you suspect a lender is breaching the interest cap or hiding costs, report it to ASIC or your state’s consumer affairs office.
- Understand exceptions: Some business and informal loans may not be covered by caps. Always get terms in writing and seek clarification if unsure.
As financial products become more complex, staying informed is your best defence against unfair lending.
