Consumer groups are asking the Coalition government to speed up the development of new laws to combat predatory payday lenders’ exploitation of vulnerable Australians.
The Stop the Debt Trap Alliance coalition is made up of several consumer groups. They are pushing for the introduction of consumer protection laws. This is something the government has committed to prioritizing in 2017.
Gerard Brody is the chief executive of the Consumer Action Law Centre. He stated that people are falling into debt traps because they have been putting off implementing these laws. Many short-term, high interest loans are being offered by predatory lenders.
The Guardian was informed by him that this was an important issue that the government knew about since a long time. It can affect many people and often makes them very vulnerable.
In a report, the Financial Ombudsman Service called some payday lenders’ behavior “unacceptable” in an earlier year. The report indicated that disputes with payday lenders rose by 130%.
Payday lenders are often targeted at low-income people who require cash fast. According to The Guardian, interest rates for these loans can exceed 800% in consumer leases and rent-to-buy programs.
Michael Sukkar (assistant treasurer) stated that the government was making “progress with changes” in order to improve consumer protections in small credit leases and credit contracts.
He stated that he recognized the need to implement reforms in these areas. The right mix of consumer protection and economic relevance must be achieved through reforms.
Stephen Jones, Financial Services Shadow minister, accused the government concealing the legislation.
They are the best payday lenders, and they have no interest in protecting vulnerable consumers. He stated that scam lenders continue to exploit vulnerable Australians.
A lack of legislation prevented the Australian Securities and Investments Commission from enforcing short-term predatory lending. Sean Hughes, ASIC Commissioner stated that the commission’s new product intervention power will allow it address the problem of payday loan.
Hughes stated that ASIC is able to intervene in financial products that have been deemed harmful by lawful providers.
Hughes explained that while the law doesn’t allow short-term lending, credit licensing will exempt them from it. However, ASIC will now have new powers to endow dodgy loans.
“In this instance many financially vulnerable customers incurred very high expenses that they couldn’t afford, often causing them to default payments that only increased and increased their financial burden,” he said.
Breaking product prevent orders could result in upto five years imprisonment or fines upto $1.26m.
While this is a positive move for consumer protection Brody stated that there must be more to ensure that all payday loans are regulated.
“Payday lending is a harmful business model because repayments take up so much of someone’s income, enticing them to become reliant on further loans,” he told ABC News.