REPORT: Payday lenders pushing borrowers over the edge
The Australian Securities and Investment Commission (ASIC) has today released a report revealing what consumer advocates have been saying for months – predatory lenders are pushing customers in vulnerable situations to take on bigger loans that create more debt and incur higher fees.
Report 805 Falling short: Compliance with the small amount credit contract obligations examined data from providers of small and medium amount credit contracts (SACCs and MACCs), following the introduction of important consumer protections for small amount credit contracts in 2022.
The report found an increase in the number of MACCs provided to customers and a concerning rise in missed repayments, indicating customers are struggling with their debt in a cost-of-living crisis.
Consumer Action CEO Stephanie Tonkin says the report’s findings are deeply concerning. ‘There are serious questions about whether these predatory loan providers are meeting their responsible lending obligations,’ she said. ‘The industry should be complying with the spirit of the reforms, not finding ways around them.’
Senior Financial Counsellor Kirsty Robson said that the report confirmed what she and others had heard from callers to the National Debt Helpline.
‘We often hear from people who applied for loans of just a few hundred dollars but were provided just over the threshold amount of $2,000. These callers tell us of being pressured to accept more debt, which also means the provider can charge substantially more fees and take a security against their possessions, like their car.’
Monthly fees for SACCs can’t be more than 4% of the loan amount, plus an establishment fee of up to 20%. MACCs can charge up to 48% p.a., plus an establishment fee of $400.
For a person struggling with debt, Ms Robson says they should call the National Debt Helpline on 1800 007 007 for free, confidential financial counselling.
Quote attributable to Dr Domenique Meyrick, co-CEO of Financial Counselling Australia:
Financial counsellors know that the people who access small amounts of credit with high costs, often do so because they’re desperate. Evading these rules is simply wrong. Financial counsellors are supporting people as they deal with the consequences of this fancy foot work and it’s great to see ASIC doing what it can to reduce the harm.
ENDS
Media contact: Mark Pearce, Media and Communications Adviser, 0413 299 567, media@consumeraction.org.au
