Consumer Action Law Centre welcomes Maurice Blackburn’s class action against Cash Converters, which alleges Cash Converters ‘illegally exploited thousands of financially struggling Australians by imposing charges that far exceed the legal interest limits’.
‘If you think credit cards are expensive, you ain’t seen nothing yet,’ said Gerard Brody, CEO of Consumer Action. ‘Before the introduction of new laws in July this year, payday loans frequently came with annualised interest rates of between 600 and 1,000%. And even now they’ll typically charge an annualised rate of around 240%. We look forward to the legality of Cash Converter’s practices being tested by the courts.’
‘The desperately sad thing is that payday loans are generally given to people on very low incomes – the very people who can least afford to be paying a premium for credit. A recent, independent report showed 80 per cent of borrowers were receiving a Centrelink payment, so clearly this is an industry which makes its money from highly vulnerable people,’ said Mr Brody
Mr Brody said Consumer Action’s financial counsellors and consumer lawyers see the harm caused by payday loans day in, day out, and that Cash Converters’ clients were well represented in calls to his organisation.
‘We’ve helped in cases where Cash Converters has given over 50 loans to customers in the space of just three years. That’s more than one high-cost loan a month. It shows how people become reliant on this highly expensive form of credit, and how Cash Converters profits from this dependence.
‘Cash Converters is Australia’s biggest payday lender, and these loans appear to represent an increasing percentage of its overall business, so its compliance with the law should be a priority for the regulator, the Australian Securities and Investments Commission.
‘It’s great to see Maurice Blackburn shining a light on this industry, it’s too easy for people to avoid the nasty truth about payday lending, but when there is a $40 million law suit on the table, people tend to take notice,’ said Mr Brody.
People experiencing financial difficulty should seek free independent and confidential financial counselling by calling 1800 007 007 nationwide.
Consumer Action has released a number of media releases regarding Cash Converters in recent times, including:
- April 2013: Pensioner sues two Cash Converters lenders in the Magistrates’ Court
- April 2012: Revised payday lending Bill puts profits before people
- March 2012: Consumer group says Cash Converters’ process need formal investigation
- October 2011: Payday lending practices challenged in court
Consumer Action’s infographic shows how, even under the new laws, a single payday loan can push a low income earner into the red.