Action Needed on Pay Day Loans (Media Release)
The WA Council of Social Service, the Financial Counselling Network, WA No Interest Loans Scheme and the Financial Counsellors’ Association of WA are calling for urgent action by the Federal Government to provide better protection for people who have taken out pay day loans.
“We are seeing the use of pay day loans rising across Perth, with the suburbs of Wanneroo/Wangara and Morley the highest consumers of payday lending, with Carey Park, Balga, Yokine and Innaloo in the top ten,” said Bev Jowle, Executive Officer of the Financial Counsellors’ Association of WA.
Consumer leases, or ‘rent to buy’ schemes are also being offered to those who do not have capacity to purchase essential such as fridges and washing machines.
“Consumers often end up being charged three times the value of these goods, even though the lenders know they cannot afford to repay,” said Ms Jowle.
The findings of the national Small Amount Credit Contract review were released last year and Ms Jowle says that the Federal Government needs to move quickly to enact them.
“Capping loan interest rates at 48% for all credit providers, including pay day lending and consumer leases should be a priority. The ease of lending also needs to be addressed to ensure people are clearer about the terms and conditions of these loans and leases. Advertisement of the interest rates and comparison rates should also be compulsory so borrowers are aware of what is expected and in the interest of full disclosure by the lenders.”
Celia Dufall from the Financial Counselling Network said that they had had a client referred to them by a mental health service provider who was now suffering significant financial distress after having been lent to despite the fact it should have been clear at the time that they were unwell.
Ms Dufall said “Often clients feel trapped and have no other choice and are quickly caught up in the vicious cycle of repeat borrowing, often losing personal items of value just to get by. With expensive establishment and ongoing fees often low income borrowers cannot afford to pay back and unfortunately, payday lenders are taking advantage of the disadvantaged.”
Louise Giolitto, WACOSS CEO, said “We need to see increased resources for financial counselling services and the No Interest Loan Scheme so that families struggling under a debt burden can access free, confidential financial support and access to loans that do not charge interest.”
0499 014 382