Payday “loan sharks” face calls for closure

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Payday loans can trap you in a vicious cycle of debt. (Source: Getty)

More than 30 consumer and community groups are calling for the shutdown of payday lenders, fearing that people who are unemployed and in need of quick access to money will be charged unreasonably high rates.

The Stop The Debt Trap Alliance calls on the government to shut down payday lenders for six months, arguing that these operators “charge some of the highest rates of all lenders.”

Organizations such as CHOICE, the Consumer Action Law Center, the Australian Council of Social Service (ACOSS), Financial Counseling Australia and The Salvation Army are among the signatories of the Stop The Debt Alliance.

“With thousands more who will lose their jobs over the next few months, these loan sharks will be rubbing their hands,” said a joint statement.

“Our financial advisers are worried and anticipate a deluge of people with payday loan debt and rent to buy due to the Covid-19 emergency.”

The alliance fears that payday lenders will sell themselves to vulnerable people in dire need of cash, but then find themselves caught in a business model that sees them continue to take out loan after loan.

“For someone who cannot afford daily necessities like food and rent, these loans are a recipe for financial disaster.

“Currently, millions of people are in a very precarious situation. Predatory businesses are in a privileged position to take advantage of this situation if we let them. “

The government website MoneySmart advises against taking out a payday loan if you are struggling to pay your bills, and recommends that Australians take out other types of loans instead, such as interest-free loans or small Speckle loans. , which are non-profit. for-profit lender.

The government must take a break from payday loans

Consumer and community groups are calling on the government to step in and impose a six-month moratorium on payday loans.

“There is only one course of action if the government is to help keep their heads above water: suspend all payday lending and hire-purchase activities for at least six months,” indicates the press release.

According to the statement, the Alliance has been lobbying the government and regulators for years to end payday loans, which are like a “time bomb waiting to explode.”

“Our calls were ignored.

“Despite meeting after meeting, investigation after investigation, we saw no action. We are now at a critical point. It’s time to shut down these predatory businesses to protect the community from financial disaster.

“Now they have the opportunity to catch up, protect vulnerable people and immediately suspend predatory loans. “

What to do if you need cash quickly

Ben King, Head of Corporate Social Responsibility at Finder, advised against using payday loans to borrow money and said it shouldn’t be used to solve long-term money problems or buy unnecessary things.

“If you find yourself in this type of situation, consider comparing your options and checking that you will be able to make the repayments,” he said. Yahoo finance.

“Some lenders like the nonprofit Speckle offer rates 50% lower than the cap rates set by the regulator and that can make a big difference.”

And if you’re having trouble paying off an existing loan, contact your lender.

Given the coronavirus crisis, lenders are more willing to be lenient with people who might not be able to repay due to job losses or who have waived late fees for a period of time.

“Others might be able to change your payment schedule. “

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