Australia’s leading consumer advocates and largest microfinance organisation have today called on the Australian Government to take a fresh look at regulation governing payday lending. New research released today shows that the vast majority of people in Australia are opposed to the lending practices of payday lenders.
The organisations, including Care Inc, CHOICE, Consumer Action Law Centre, Financial Counselling Australia, Financial and Consumer Rights Council, Financial Counsellors Association of NSW, Financial Rights Legal Centre and Good Shepherd Microfinance, today released polling data on attitudes to the payday lending industry.[i]
The key findings were:
- Less than 1 in 5 (17%) Australians view the payday lending industry favourably.
- Only 1 in 10 (10%) Australians think that the interest and fees charged by payday lenders are reasonable.
- Almost 4 in 5 (77%) Australians would support the Australian Government to restrict the amount of interest and fees that payday lenders can charge customers.
- Three quarters (74%) of Australians believe that it is not responsible lending to offer payday loans by promising “5 minutes”[ii] application time and money paid “within 60 minutes”[iii].
- Over 4 in 5 (83%) Australians believe payday lenders should not be allowed direct access to borrower’s bank accounts to ensure priority payment over living expenses.
Carmel Franklin, Director, Care Financial Counselling Service said:
“The majority of Care Inc.’s low income clients with payday loans were not aware they could have accessed a no-interest loan. Sadly, for many of these already vulnerable people the payday loan becomes a spiral of ongoing debt that sees them having to pay their lender before buying food; they therefore have to borrow again and again”.
Alan Kirkland, CEO, CHOICE said:
“Payday lenders trade in misery, preying on vulnerable consumers and they are the last people you should speak to if you’re in financial distress. They often market themselves as nimble and a quick way to get cash but in reality they are the fast track to financial ruin.”
Gerard Brody, CEO, Consumer Action Law Centre said:
“Our team of financial counsellors and consumer lawyers see first-hand the harm caused by payday loans. Repayments are generally secured through direct debits, which take a first stake in a borrower’s income—often leaving them without enough money for everyday living. This encourages those struggling financially to return to the lender, creating ongoing reliance and a debt trap. The problem is that payday lenders win when the consumer loses.”
Bernadette Pasco, Acting Executive Officer, Financial and Consumer Rights Council
“Payday lending is one of the most disempowering forms of lending – clients get trapped in the cycle of lending for often ordinary, everyday things that we all take for granted.”
Fiona Guthrie, Executive Director, Financial Counselling Australia said:
“Payday lenders say they provide a useful service. That is not the experience of the financial counselling sector. We consistently see clients who are worse off after taking out a payday loan, and are experiencing serious financial hardship. If you can’t pay your day to day bills, going further into debt is never going to be a solution.”
Graham Smith, President, Financial Counsellors Association of NSW (FCAN) said:
‘The business practices of some payday lenders are of great concern to the Financial Counsellors Association of NSW Inc (FCAN). The conduct of some payday lenders contributes greatly to the financial hardship, stress and helplessness many clients face when they get deeper into financial difficulty.’
‘While FCAN acknowledge the recent efforts of ASIC to clean up the sector, the ‘Four Corners’ report highlights the need for further action. FCAN strongly supports the further regulation and increased monitoring of the payday lending industry.’
Alexandra Kelly, Principal Solicitor, Financial Rights Legal Centre said:
“We take over 100 phone calls every day from NSW residents struggling with debt and financial hardship. Many of these callers have taken out a payday loan at some stage, and it has in my experience never helped them get back on their feet and just made it worse.”
“Worryingly, the fact that polling shows younger Australians (aged 18-34) are more likely to believe that payday loans are responsible lending indicates that this industry is getting better and better at looking hip and attractive to young people. Pay day lending is becoming normalised.
“Callers to Financial Rights have rarely used pay day lending once. By the time they call us they have often had a series of loans, and a series of lenders, and they just can’t juggle any more. It may be fast and easy to apply but the pain of repaying drags on and on. These loans are not the quick fix they seem.”
Adam Mooney, CEO, Good Shepherd Microfinance said:
“The economics and the human impact of the payday lending and goods rental industry are damaging for everyone in Australia. The Murray Financial System Inquiry has recommended the Australian Government increase investment in inclusive finance to successful programs like the No Interest Loan Scheme and StepUP.”
“Four out of five of our clients stop using expensive payday loans and experience economic mobility – people move away from financial crisis and hardship towards stability, increased income and resilience.”
“Instead of paying up to three times the value of a fridge, furniture or bed through a fringe lender, simply pay the cost of the item itself over 18 months with a No Interest Loan, backed by the Australian and State Governments and NAB.”
Adam Thompson (Care Inc) 02 6257 2788
Tom Godfrey (CHOICE) 02 9577 3239 or 0430 172 669
Michael Bellairs (Consumer Action Law Centre) 0413 299 567
Bernadette Pasco (Financial and Consumer Rights Council) 0467 670 078
Fiona Guthrie (Financial Counselling Australia) 0402 426 835
Graham Smith (Financial Counsellors Association of NSW) 0432 672 624
Alex Kelly (Financial Rights Legal Centre) 02 8204 1370 or 0412 459 842
Dan Simpson (Good Shepherd Microfinance) 0409 138 471
[i] The study was conducted online by Lonergan Research among 1,030 Australians aged 18 years and over. Surveys were distributed throughout Australia including both capital city and non-capital city areas between Tuesday, 24th March and Friday 27th March 2015.
[ii] via https://cashloans.cashconverters.com.au/
[iii] via https://nimble.com.au/