Struggling Aussies are set to get much-needed cash back in their pockets following major enforcement action by the Australian Securities and Investments Commission (ASIC).
With news that payday lender Cash Converters is set to pay a $1.4m penalty and give almost $11m back to Australians, consumer advocates say the Government must act on a recent review into the industry.
“It’s good to see ASIC take action to benefit some affected consumers, but the Government must act on the recommendations it was given earlier this year to stop irresponsible and predatory lending by the payday loan industry,” says Gerard Brody, CEO of Consumer Action Law Centre.
The Small Amount Credit Contracts Review recommended that:
- Repayments on payday loans should not exceed 10% of the borrower’s net income
- Payday lenders should disclose the APR (annualised percentage rate) for each loan so borrowers know exactly how much their loan is costing them, compared to other forms of credit
- Payday lenders should be banned from unsolicited sales offers to current or previous customers
- Payday loans should have equal repayments over the life of the loan
“The best way to deal with this rogue industry is to stop giving payday lenders special treatment and cap the amount all loans can charge at 48% per annum inclusive of fees and charges. Almost every other form of credit is bound by this, so we see no reason for payday lenders to evade it any longer. Today’s action on Cash Converters shows that this industry can’t be trusted with Australian’s best interests” says Brody.
The Centre also called for greater regulatory and other legal action against Cash Converters for using benchmark living expenses in affordability assessments rather than using actual expenses recorded in consumer’s bank accounts.
“Responsible lending laws and robust affordability checks should benefit all borrowers.
“Only a proportion of Cash Converters borrowers will benefit from this action,” says Brody, “many more customers who borrowed in-store and online were subject to the same inadequate lending practices, and should also receive refunds”.
Quotes attributable to Gerard Brody, CEO Consumer Action Law Centre:
“The repeated enforcement actions tell us that the payday lending industry can’t seem to lend responsibly under the current legislative framework. This is an industry that has caused significant harm to Australians and we need real and urgent action from the Government.”
“The payday lending industry is preying on those who are in extreme financial straits but it is also encouraging a consumption at any cost mentality, which risks growing a new generation of debtors.”
“Online lending is growing at an alarming rate. There’s no convenience in being irresponsibly lent to. Digital tools should be helping us make smarter decisions, not be drawn into predatory products.”