Usury Laws Australia 2025: Interest Rate Caps & Lending Rules

Australia’s lending landscape is shaped by a web of regulations, but few are as important—or as misunderstood—as usury laws. With interest rates rising and cost-of-living pressures mounting in 2025, these rules are back in the spotlight. Here’s what every borrower, business, and lender should know about the modern face of usury in Australia.

What Are Usury Laws and Why Do They Matter?

Usury laws set the legal limit on the amount of interest a lender can charge a borrower. The intent is to prevent exploitative lending and protect consumers from crippling debt traps. In Australia, these laws are mostly managed at the state and territory level, but recent federal action has changed the playing field for high-cost credit and payday loans.

Usury laws matter more than ever in 2025 for several reasons:

• Rising interest rates: The RBA’s cash rate is at its highest since 2012, pushing up borrowing costs across the board.
• Growth of fintech lenders: Digital platforms offering quick loans often push the boundaries of what’s considered fair or legal.
• Cost-of-living crisis: Vulnerable Australians are turning to alternative lenders, making protections more critical.

How Do Usury Laws Work in Australia in 2025?

The structure of usury regulation is a patchwork:

• State and territory laws: For example, New South Wales’ Interest Rates Act 1984 caps rates on personal loans at 48% per annum (including fees and charges). Victoria, Queensland, and others have similar rules.
• National Consumer Credit Protection Act (NCCP): At the federal level, the NCCP (as updated in late 2024) sets maximum costs for small amount credit contracts (SACCs, aka payday loans) and consumer leases.

In 2025, a few key changes are in effect:

• Payday loans (SACCs): Still capped at 48% p.a. (all costs included), with a maximum establishment fee of 20% and monthly fee of 4% of the loan amount.
• Consumer leases: New rules limit the total amount payable to 48% p.a. equivalent, closing previous loopholes exploited by rent-to-own providers.
• Buy Now, Pay Later (BNPL): For the first time, the 2024 Credit Reform Package applies responsible lending obligations and fee caps to BNPL providers, though most traditional usury caps don’t yet apply.

These laws are enforced by ASIC at the federal level and by state consumer protection agencies. Penalties for breaches can include fines, compensation orders, and in some cases, criminal charges.

Real-World Impact: Borrowers, Lenders, and the Finance Industry

Usury laws have a direct impact on the options available to everyday Australians:

• Borrowers: Interest rate caps provide a safety net, especially for those who turn to payday lenders or consumer leases. However, some lenders tighten eligibility, making credit harder to access for high-risk borrowers.
• Lenders: Traditional banks, fintechs, and payday lenders must innovate within strict cost boundaries. Many have shifted to alternative revenue models, like subscription lending or embedded insurance.
• Small business: While most usury laws target consumer credit, some business loans are affected—especially for sole traders or microbusinesses using unsecured personal finance.

Recent headlines show the laws in action. In March 2025, a major payday lender was fined $3.2 million for charging effective annual rates above the 48% cap through hidden fees. Meanwhile, the expansion of BNPL regulation is forcing providers to reassess their fee structures, with some introducing hard caps on late payment penalties.

What’s Next? The Future of Usury Laws in Australia

With the rapid evolution of digital lending and consumer finance, expect further scrutiny of usury laws in 2025 and beyond. The Treasury is conducting a review into whether BNPL and wage advance services should be subject to the same caps as payday loans. Consumer advocacy groups are also pushing for a national harmonisation of interest rate limits to avoid confusion and regulatory arbitrage.

For now, the message is clear: understanding the current usury landscape is essential for anyone borrowing or lending in Australia. The balance between access to credit and consumer protection is delicate—and under more pressure than ever.