Payday lenders labelled 'loan sharks'

by Adam Smith09 Dec 2011

Social welfare charity Anglicare has slammed a government report on payday lenders, and has called the lenders "loan sharks".

A Parliamentary Economics Committee report has advised against the government's proposed interest rate and fee cap on payday lenders, arguing it could render the industry unviable. Anglicare director of advocacy Sue King has labelled the decision a win for the lenders at the expense of consumers.

"It is morally irresponsible for Government to watch pay day lenders exploit struggling families
who are trying to build independence and not put a stop to it. We do not need to protect pay day lenders. Instead Government should be working with industry to provide low income families access to mainstream financial products," King said.

King said the committee's recommendations ran the risk of rendering payday lending reforms "ineffectual in protecting consumers". She said most borrowers accessing payday loans were using them to pay for basic necessities, and called on the government and NGOs to pick up the slack in providing financial relief to struggling families.

"There is huge opportunity for Government, NGOs and financial institutions to partner in equipping vulnerable families with skills for long term independence rather than leaving them to the mercy of short term loan sharks," King said.

The National Financial Services Federation had a markedly different outlook on the report. The NFSF, which represents payday lenders, called the recommendations the "right balance between protecting vulnerable Australians and maintaining a viable industry".

"This is a win-win for the 500,000 Australian battlers that rely on short-term loans to pay for unexpected expenses," NFSF chairman Mark Redmond said.

Related stories:

Payday lenders deny 'sticking their head out'

Interest rate cap could end payday lenders

COMMENTS

  • by Bruce Gibbons, past president Finance Brokers Asso 9/12/2011 9:54:21 AM

    Ms King's (of Anglicare)comments are as outrageous as they are ill-informed. (reputable) Pay-day lenders form an integral part of the financial market. They assist struggling consumers, where mainstream lenders turn their back.
    The proposed 48%pa limit is a joke, and will render the industry unviable. These people needing money for urgent medical attention will have nowhere to go, and be denied all assistance.
    Do the sums - If they lent someone $200, for one week, at 48%pa, the Pay day Lender will get $1.84 interest earn. Would you, Ms.King, or any other do-gooder, lend your money, to someone you've never met before, $200 to earn $1.84 for the risk/return. Open your eyes lady, there's a bigger picture out there.
    Bruce Gibbons,
    past President, Finance Brokers Association.

  • by Loan Shark 10/12/2011 4:20:00 PM

    If it is okay for Ms King to sling around abusive labels such as loan sharks, would she mind if Anglicare and similar organisations can collectively be referred to as beggars?