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PAYDAY lenders will be banned from hitting customers with extraordinary interest rates from the end of this month when the State Government begins its long-awaited crackdown on loan sharks.

It comes as Queensland and the other states agreed at the Council of Australian Governments meeting this month to ensure consumer credit laws were consistent across the country.

From July 31, any loans issued in Queensland will have to comply with a new cap that limits loan rates, fees and charges to 48 per cent.

Attorney-General Kerry Shine said the cap would protect consumers who in some cases were stung with interest rates of up to 1600 per cent.

"I have been told of some cases where people have borrowed smaller amounts of money only to be crippled by the debt caused by excessive interest rates," he said.

"This rate cap will provide those borrowers with some certainty and give them a better chance of paying their loans."

The reforms come after the State Government was criticised for repeatedly missing deadlines to introduce a cap similar to those in place interstate.

The industry has warned the cap will devastate businesses, but Mr Shine said any lender caught breaching the cap could be fined up to $500,000.

Federal Small Business Minister Craig Emerson said the move to regulate credit cards, personal loans and micro-lending Australia-wide would give consumers further protection.

"Interest rate rises are putting the squeeze on people who already have conventional borrowings – credit cards, mortgage payments or personal loans," he said.

"Those that allow themselves to fall into the trap set by dodgy lenders can quickly find themselves in a bottomless pit."

Dr Emerson said the Federal Government's Business Regulation and Competition Working Group would report back to the COAG meeting in October.

Source : http://www.news.com.au