Millions of vulnerable Australians turn to payday loans
New report says Australian households risk spiraling into payday lender debt
Payday lenders take advantage of vulnerable people and trap them in debt, consumer groups say, following new data showing payday loans in Australia set to hit $ 1.7 billion by end of the year.
More than 4.7 million payday loans worth $ 3 billion have been issued in the past three years, generating lenders net profit of approximately $ 550 million.
This The data, from the Stop the Debt Trap Alliance, also shows that about 15 percent of payday loan borrowers have spiraled into debt in the past five years.
The alliance – made up of consumer groups and charities including the Salvation Army and Good Shepherd Microfinance – calls on the federal government to introduce tougher laws to protect people from “predatory” payday lenders.
Consumer Action CEO and alliance spokesperson Gerard Brody said payday lenders are taking advantage of vulnerable Australians.
“The damage caused by payday loans is very real, and this latest data shows that more Australian households are at risk of spiraling into debt,” Brody said.
Payday lenders offer short-term, high-interest loans (up to 400%), targeting low-income people who need money fast.
The report noted an increase in the number of women using payday loans, from 177,000 in 2016 to 287,000 this year. Over 41 percent of these women were single mothers.
This follows research in 2018 that found more than one in five Australian households relied on payday loans to cover the cost of living.
The alliance urges the federal government to adopt the Small Credit Agreement Review (SACC) recommendations into law.
These recommendations include capping total consumer lease payments and restricting loan repayments to 10 percent of a person’s income.
Brody said the government has been blocking these proposals for more than three years, adding that the community cannot wait any longer.
He said that was inconsistent with Prime Minister Scott Morrison and Treasurer Josh Frydenberg’s tough stance on big banks in the wake of the Royal Commission on Financial Services.
“Why are they allowing payday lenders to escape legislative reform when there is a broad consensus in the community on the need to strengthen consumer protection? ” he said.
“The consultation period for this legislation is over. Now is the time for the federal government to do its part to protect Australians from financial harm and urgently bring these changes to parliament. “
The Australian Council for Social Services agreed, Tweeter that payday lender reform was overdue – especially given the struggles of Newstart recipients.
“It’s no surprise that this predatory industry is growing as government grants like Newstart fall so far behind the cost of living, forcing people into desperate circumstances,” he said.