Payday loans come under fire

by Caroline Dann28 Aug 2012

A debt manager is urging the government to tighten regulations for payday loan creditors, in the face of growing consumer debt.

 
Debt Rescue claims payday loans are part of a “vicious cycle” that only encourages further debt.
 
“It is a desperate situation for a growing number of people who feel they have nowhere else to turn,’’ said Rachael Witton, Debt Rescue’s operations manager.
 
Witton said “sweeping industry and educational changes” were needed to combat the debt cycle.
 
“We need an urgent reform of the financial hardship provisions used by creditors so there is a more uniformly-accepted practice based on what individuals can genuinely afford to be adopted by all creditors,” she said.
“Unfortunately there is place for pay-day loans and short term lending which will continue until the government shifts its thinking on the issue.’’
 
Her comments come after ASIC cracked down on two personal loan lenders for misleading consumers on rates and obligations.
 

COMMENTS

  • by PeterT 28/08/2012 11:46:42 AM

    Investment loans are like body builder protien shakes - With discipline they can have great results but they can do damage if you're not careful.

    Owner occupied loans are like carbs - in a balanced financial diet they're fine and will get you where you want to go, but out of balance and you're on a downward slide.

    Credit cards are like alcohol - in moderation they're not that bad, can give you a buzz and has its social benefits. You can get in trouble if you take too much or become addicted.

    Personal (consumer) loans and store loans are like marajuana - you don't probably don't really need it and it's unlikely to really do you any good, but it feels good to try it sometime. Tricky to keep under control and can be a very slippery slope downwards.

    Payday loans are like heroin or crack - you're already messed up if you think you need it, it'll give you a tempory feeling that all your problems are solved, but it's highly addictive and you'll almost certainly be back for more tomorrow.

  • by Lyn Turner 28/08/2012 2:33:46 PM

    Miss Witton needn't worry, the Consumer Credit Legislation Amendment (Enhancements) Bill 2012 that passed through both levels of Parliament recently will close down the majority of lenders by or on 1 July next year and, from March 1, will prevent anyone lending to Centrelink recipients at all. Now she needs to worry about the other 630,000 Australians who will have nowhere legal to go for loans for to fix their boat, visit family overseas, travel to a funeral, etc., etc....

  • by Rosey in Victoria 29/08/2012 12:23:50 PM

    Obviously Ms. Witton is not keeping herself up to date on the newest reforms, which is concerning considering the business that she is in...Hardship provisions have been overhauled and it is now easier than ever for those that are struggling and in some cases even those that do not have a genuine circumstance to make an application of hardship or at the very least delay a default against thier name. I am a Micro Lender and I fully support the hardship provisions in regulation and as a RESPONSIBLE LENDER I am always on the lookout to ensure my customers best interests are priority not only with us, but any/all thier expenses- 1st why would I lend money to someone who does not understand and can ill afford repayments, i'm not a Philanthropist, i'm a business person with bills to pay. And 2nd I have a responsibility to ensure clients even if they have the ability to pay are not in a constant reborrow cycle. To me that demonstrates that there is a problem, and in this instance my company takes every step to help a consumer get out of the repeat borrowing cycle by recommending a payment plan with very small repayments often waiving any and all fees and interest to rid them of the debt sooner- and give them suggestions on how to approach other debts that they may find are becoming overwhelming. I'm sure Ms. Witton has had dealings with payday loan company's in trying to help sort thier clients debt and even though she'll never admit it... I'll hazard a bet she's had more success dealing with payday lenders in coming to a resolution than she ever has with a utility, phone or other mainstream credit supplier- my theory on this point we are too easy to deal with and if we were the crux of the majority of her clients debt problem she would probably go out of business as the clients that take a genuine responsibility could have dealt directly with the lender and probably gotten a better result but that's OK our industry are easy targets as the stigma attached to our industry goes back 20 or more years even though it has little relevance in todays modern and educated Australia but it's just easier for those that dont understand it to criticize it to feel they are doing thier bit. We are also the only industry that gets criticized for providing GREAT service as customers are happy with thier lender and therefor may not shop around for a better deal- this would be the ultimate outcome for any other reatil business. Finally Peter T- Very clever however we are not dealers and unlike alchohol or carbs there is no continuous supply available of our product an unwarranted comment indeed!!!