Moves to clamp down on "payday lending" have failed to rein in the strong growth in short-term loans with very high interest rates.
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On the contrary, the value of payday lending has jumped by 125 per cent since the global financial crisis, despite the introduction of an interest rate cap.
Rather than being restricted, payday lending appears to have become more mainstream since reforms of 2013. That has consumer advocates concerned.
Payday lending refers to small value loans of a couple of thousand dollars or less, often used to cover household expenses.
A report from the Australian Securities and Investments Commission last week estimated $400 million in payday loans were written last financial year, a 125 per cent increase since 2008.
Payday lending accounts for only 0.4 per cent of consumer loans, but it's closely watched because these high-interest loans can be particularly damaging for vulnerable customers.
So, why is it growing so quickly?
Gerard Brody, chief executive of the Consumer Action Law Centre, says one reason may be that government measures to stamp out predatory lending ended up being quite industry-friendly.
When the Labor government introduced tighter rules for loans of less than $2000 in 2013, establishment fees were limited to 20 per cent of the loan value and monthly interest rates were capped at 4 per cent.
This was much more generous to the lenders than the government initially proposed, and Brody says payday lenders can still charge interest rates of up to 240 per cent a year today.
ASIC says the number of new payday lenders entering the industry each year has more or less remained constant since the reforms.
The internet has also made it easier to borrow a few hundred dollars without needing to turn up to a shopfront.
This week's graphic shows that the biggest payday lender, Cash Converters, recorded bumper growth in online cash advances of about 40 per cent in the second half of 2014 alone.
The previous government's changes were never intended to wipe payday lenders out, as these are amounts that banks typically will not lend to customers who may have irregular incomes.
However, regulators are concerned that many in the industry are not following laws designed to protect vulnerable consumers from predatory lending.
For instance, a key goal of the reforms was to stop borrowers entering a "debt spiral" where they take on multiple loans to help them meet other debt repayments.
But ASIC's review found payday lenders were often failing to comply with responsible lending rules in this area.
A review of customer files found that two-thirds of borrowers had either taken out two or more payday loans in the last 90 days, or they were in default on a small amount loan.
ASIC said this was clear evidence that many in the industry are still allowing customers to use this very expensive form of finance as part of their monthly budget.
It also said some lenders were setting longer loan terms in order to charge more fees, and cited evidence of "systemic" weakness in record keeping.
Payday lending may have grown strongly, but the industry has been put on notice over its compliance with consumer laws.
