Anglicare Tasmania chief executive Dr Chris Jones said the loss of protections would put more people at risk of being sold unsuitable and unaffordable loans.

"Senator Lambie can make a difference and we have made her aware of how axing these laws would affect vulnerable Tasmanians," Dr Jones said.

"Our financial counsellors are worried about the increased risk of harm to people such as those with low financial literacy or mental health issues, or who are affected by family violence.

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"Debt will explode in households who have been helped by the COVID supplements but who just can't afford debt. We want the government to take the changes off the agenda.

"If these changes are made it will also be more difficult for financial counsellors to seek redress when a person has been sold a debt they are unable to repay."

The federal government has introduced a bill to amend the National Consumer Credit Protection Act to remove responsible lending obligations for most lenders.

It wants the new laws passed by March to increase the flow of credit.

Anglicare financial counsellor Fiona Moore said the current protections allowed her to help people who were often suicidal because they could not pay debts.

She used the example of Annabel (not her real name) a disability pensioner, who was "overwhelmed by her financial situation" and did not want to live.

"The debts that she had accumulated with several creditors were exacerbating her severe anxiety and depression and she wasn't going to her medical appointments," Ms Moore said.

"I was able to reduce Annabel's repayments from nearly $400 to $80 a fortnight and arrange a manageable payment plan for another debt via CentrePay.

"I would not have been able to secure this positive outcome if the current protections were not in place.

"Annabel's advocate told me that she can now afford expenses associated with her health and daily living and 'that she feels like living again'."

Ms Moore said another woman she had helped had 12 credit cards and debts of $200,000.

Dr Jones said the repeal of the protections would go against the first recommendation of the Banking Royal Commission.

"The legislation, if enacted, would reduce requirements on lenders and brokers to check the suitability of loans and would remove penalties for irresponsible lending," he said.

Senator Lambie said she would consider the legislation carefully.

"Obviously we don't want to see anyone taken advantage of, especially during a pandemic," she said.

"Payday lenders have caused grief for Australians before, so I'd want to be careful if I were them."

Anglicare urges anyone who find themselves in financial hardship to contact the National Debt Helpline on 1800 007 007 without delay.

For more information on this free and confidential service, visit https://www.anglicaretas.org.au/financial-counselling/