THE federal government has been accused of caving in to industry lobbying over its proposed reforms to the payday lending sector, with consumer advocates angered by a move to double caps on the fees small lenders can charge their clients.

But the lending industry - while still digesting the government's revised draft laws - said that despite the changes, aspects of the reforms remained ''unworkable''.

Yesterday the Financial Services Minister, Bill Shorten, released revisions to draft laws introduced into Parliament in September, saying the legislation had benefited from ''significant review'', including consultations with industry.

He said the changes had improved the ''effectiveness'' of the legislation.

Under the original draft, upfront fees charged by payday lenders would be capped at 10 per cent of the loan for amounts of less than $2000, with monthly interest payments capped at 2 per cent.

The revised legislation doubles the caps to 20 per cent of the loan for upfront fees, and 4 per cent of the loan for interest payments.

The changes follow a recommendation from a parliamentary inquiry late last year that the government revisit this issue to ensure an ''appropriate balance between consumer protection and industry viability''.

The doubling of the caps was a plan put to the parliamentary inquiry by Cash Converters, which warned that the lower cap would have a ''tsunami-like effect on the microfinancing industry and small-amount, short-term loans would disappear from the market''.

But the Consumer Action Law Centre said yesterday the changes were ''devastating news'' for the 50 consumer and community agencies that had backed the original reforms, and said the bill would not curb ''unfair business practices models and therefore protect the vulnerable and disadvantaged''.

Philip Johns, chief executive of the National Financial Services Federation - which represents small-amount, short-term credit providers - said the industry was still reviewing the legislation.

But he said it still included measures - such as a ban on loan refinancing - that were ''unworkable restrictions for consumers''.

The opposition spokesman on financial services, Mathias Cormann, criticised the government's linking of the lending legislation to ''completely unrelated'' revisions to executive pay laws - which concern the chairman's ability to vote undirected proxies on a company's remuneration report. The issue needed to be fixed immediately, he said.

Mr Shorten and the Community Services Minister, Julie Collins, released a discussion paper on payday and small-amount lenders, that said up to 49 per cent of customers had incomes of less than $24,000 and half were partially employed or unemployed.