Over 30,000 Payday Loans Targeting Financially Fragile People Take Out Each Week | australian politics


Payday loans targeting the financially vulnerable are being taken out at a rate of over 30,000 per week, with the amount borrowed in Australia on track to reach $ 1.7 billion by the end of the year.

New industry data to be released on Tuesday shows 4.7 million individual loans worth an estimated $ 3 billion have been paid in the past three years, with more than 310,000 additional households subscribing to the products of high interest debt since mid-2016.

The number of loans taken out per month has grown from 100,000 per month in 2016 to over 135,000 per month this year, generating lenders an estimated profit of $ 550 million over the past three years.

The Stop the Dept Trap alliance, which includes 20 consumer advocacy groups, will release the report to highlight the damage caused by continued delays in laws to crack down on the industry the Coalition promised in 2016.

A low-value credit contract bill aimed at increasing protections for vulnerable consumers was released by the government in 2017, but despite a promise that it would introduce the bill by the end of the year , he did not do it.

Short-term, high-interest loans, which are for amounts up to $ 2,000 and charge annual interest rates of up to 407%, target those in financial difficulty and can lead to financial hardship. vulnerable people in a debt spiral.

Consumer Action Law Center chief executive Gerard Brody said the amount loaned by the industry over the past three years has doubled from $ 881 million in 2016 to the estimate of $ 1.7 billion for the end of 2019.

“The damage continues to grow and there is an increasing proportion of households that are affected by these products,” Brody told Guardian Australia.

“What these loans do is hold people back and stop them from moving forward.”

The growth of online lending has fueled this booming industry, with research showing that 85.8% of loans are generated online, down from just 5.6% a decade ago.

The research also highlights the number of households in financial difficulty and in financial difficulty that are indebted to the sector.

The report defines those in financial difficulty as those who face their financial situation while juggling credit cards and loans, but who are described as “working poor”, while those in financial difficulty do not meet their expectations. financial commitments and often depend on social assistance.

According to research, the number of financially troubled households with payday loans has grown from just 21,000 in 2010 to 554,000.

Around 15% of payday loan borrowers are expected to spiral into debt, which means an additional 324,000 Australian households are at risk of going into debt, which can lead to events such as bankruptcy.

Brody said the growth in the number of financially troubled households accessing loans in the sector was a result of a combination of the ease with which people could access loans online, the lack of regulation and a growing number. of people under financial stress.

“There is a group in the community that is getting harder and harder, for these low income workers their lives are getting more and more precarious and that is why they are turning to this industry.”

The number of women using payday loans has also increased, from more than 100,000 since 2016 to 287,000, now accounting for 23% of all borrowers, with almost half of these single parents.

Brody said that while the government had “acted very harshly” on the banks since the royal commission, it was allowing unscrupulous payday lenders to escape legislative reform that would help protect consumers.

He wants the recommendations of the review of low-value credit contracts to be adopted “urgently”, capping total payments of a consumer lease and limiting loan repayments to 10% of income. ‘a consumer.

“This legislation will be key to making payday loans and consumer leases fair for all Australians. There are only 10 sitting days left to do it, ”said Brody.

“It is time for the federal government to do its part to protect Australians from financial damage and urgently bring these changes to Parliament.”

Deputy Treasurer Michael Sukkar said the government remains committed to reforming the sector, but reforms must “strike the right balance to strengthen consumer protection, while ensuring that these products and services can continue to play a role. important in the economy “.

The delay in reforms comes after Prime Minister Scott Morrison was forced to water down suggestions for an internal reaction to the changes, saying as treasurer he was “very concerned” that the people low-income people find themselves in deeper financial difficulties.

Last year, MP George Christensen spoke out against the proposed crackdown, saying the industry was necessary for those “desperate” for financial aid.

The Institute of Public Affairs, the National Credit Providers Association and the Consumer Household Equipment Rental Providers Association have pressured the government not to support the changes.

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