Government taking on payday loans

    From: AAP
    April 25, 2012


THE Federal Government wants to discourage people taking out high-cost, small-amount "payday loans''.

In a discussion paper released on Tuesday, it outlined a set of programs to reduce the need for such loans by improving access to low-cost and "fairer'' government assistance.   

In 2011, the Government provided $6 million to five community finance organisations offering products to people who would otherwise not be able to access finances from mainstream sources.

On Tuesday, the Government said it may consider extending the criteria for accessing these programs for people looking for small amount loans.

It also flagged increasing its promotion of assistance programs already being offered to low-income earners struggling to access credit.

The paper says the number of people taking out the loans had increased substantially over the past 10 years.

The payday loans, defined as up to $2000 with a maximum term of two years, have effective interest rates of up to 1000 per cent.    

Most borrowers use these small amount loans to meet basic living expenses.

Financial Services Minister Bill Shorten said payday lending was risky for vulnerable and low-income people.

``People often borrow money from payday lenders in order to meet short-term commitments like rent and groceries,'' he said in a statement.   

``The interest charged on the loan is often so exorbitant it only worsens the financial position of the consumer in the long-term, who may need to take out further loans in order to pay off the original loan and the interest.''   

Public submissions on the discussion paper can be made by June 4.

The Opposition's financial services spokesman Mathias Cormann said the Federal Government should genuinely consult all stakeholders in the industry rather than ``indulging in a sham consultation to camouflage its ideologically driven attack on the payday lending industry''.

The Government also released the Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 (the Enhancements Bill) on Tuesday.

The Bill calls for caps on costs charged by lenders on small amount loans and greater protections for seniors applying for reverse mortgages on their homes.

The Bill is open for public submissions until May 7.


Comments on this story

    Mel Posted at 5:36 PM April 25, 2012

        If people choose the get ripped off by borrowing money off these leeches, well that's their decision. Borrow to pay bills because they're short of money, pay some of that back and borrow some more next week because they're short of money and on it goes. Either get a job instead of sponging off the taxpayer, get a better paying job if your current job doesn't support your lifestyle or cut back on your spending. Simple.

    Ray of W.A. Posted at 1:19 PM April 25, 2012

        Once again the Liberals are showing their true colours,they are not interested in looking after the working men or women,they are only interested in looking after businesses to keep them profitable(and the donations coming in to the Party).   

whilst they are at it.. what about these internet scams.. I read where aussies are being ripped off to the tune of millions year in year out..

it doesnt seem to matter how often these get rich quick schemes are exposed...they still win.

what happened to going without?.. what happened to saying no thank you not interested?

Fo a bit of one-off quick cash, these places are actually a good idea.

But rising costs and the abysmally low payments for
SOME of those on welfare, make using these places
virtually essential if you are to survive.

Make it FAIRER for the poorest to use these places, do
NOT make it harder or impossible.

Or do the RIGHT thing, for once, and raise payment rates.

I suspect that ALL that will come of this, is that the u/e, sole
parents etc (those on the LOWEST 'benefit') will find that they
will no longer be ABLE to get these loans.

if you borrow money from the short term sharks, you will lose.