CHOICE welcomes Payday Lending reforms

 
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01.Low incomes and payday loans a toxic mix

Campaign backs up payday lending reforms

The Consumer Action Law Centre, Financial Counselling Australia and the Consumer Credit Legal Centre NSW have launched a campaign to end the exploitation of vulnerable consumers by High Cost Short Term Lending, better known as Payday Lending.

This follows reforms released by the Government for consultation in late August which will introduce a uniform national limit on the amount payday lenders can charge borrowers.

What is wrong with payday loans?

According to Catriona Lowe, co-CEO of the Consumer Action Law Centre, payday loans can lead vulnerable consumers further into poverty.

‘High cost shot term loans are offered at rates of 400% or 600% per annum or higher. The low income of typical borrowers and use of borrowing to fund everyday current living expenses is a toxic combination which can push consumers into a spiral of debt and cause or exacerbate poverty. The payday lending industry has been expanding rapidly over the past 10 years. Without action it’s only going to get worse for consumers. In America, the home of payday lending, there are now more lending outlets than McDonalds and Starbucks combined.’ Ms Lowe said.

What payday lending reforms mean

Consumer and welfare groups, including CHOICE, have welcomed the reforms. While the proposed legislation does not impose the universal 48% comprehensive interest rate cap that consumer organisation have been calling for, the legislation will limit charges for payday loans and also stop the refinancing of debt with a new loan.

More information about the campaign to support the Government’s proposal is available at debttrap.org.au.

 
 

 

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