Government urged to tackle payday loans and consumer leasing ‘sharks’

The federal government is urged to act quickly and toughen laws covering the payday lending and consumer leasing industry.

A coalition of consumer groups, including Choice, Consumer Action Law Center and Financial Counseling Australia, are in Canberra today to lobby for urgent legislative changes.

“Consumer leases and payday loans often target the most vulnerable consumers in our society,” said Tom Godfrey of Choice.

Payday loans, also known as cash advances, are typically less than $ 2,000. They usually charge high fees and interest rates and are offered by companies like Cash Converters and Nimble.

But low-income earners who use these loans to make ends meet can be caught in a debt spiral with large repayments.

Consumer leases, which are typically offered for household products like refrigerators and televisions, can allow customers to pay four times the normal retail price for the item.

Under a consumer lease, the customer does not own the property at the end of the contract.

Government confirms legislation will be debated this year

The 2015 Small Amount Credit Agreement (SACC) review made a series of recommendations for legislative changes.

The government has accepted most of the SACC’s recommendations, but consumer groups are frustrated that they have not yet legislated any changes.

“Also require equal repayments over the life of a payday loan, ban monthly fees if a payday loan is prepaid, and ban unsolicited offers of payday loans to clients.”

A spokesperson for the responsible minister, Michael McCormack, confirmed he would meet with the groups in Canberra.

The government told the CBA that the legislation will be introduced and debated this year.

A spokesperson said the government is committed to balancing access to low-value consumer contracts and consumer leases with appropriate levels of customer protection.

The Consumer Household Equipment Rental Providers Association (CHERPA) has previously said it is working hard to weed out rogue operators and enforce a strict industry code of conduct.

Last year, Cash Converters, Australia’s largest payday lender, was ordered to pay fines and repay consumers millions of dollars in loans for violating responsible lending provisions.

But the company’s watchdog has come under fire for its investigation of the company, with consumer advocates saying many more who won’t receive refunds are suffering.

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