Call for tougher rules on payday lenders to protect poor, vulnerable

‘Debt vultures’ are circling cash-strapped, vulnerable people, with Werribee home to four payday lenders within 500m of the train station. Here's how they reel people in.

Vulnerable people who need money in a hurry are being preyed on by payday loan sharks.

Vulnerable people in Wyndham — one of the state’s poorest municipalities — are being preyed on by payday loan sharks, experts have warned.

Denis Nelthorpe, chief executive of community legal service WEstjustice, told the Leader the centre had a huge number of clients taking on crippling debts from “predatory lenders” just to make ends meet.

Nearly one in five people in Wyndham (17 per cent) are living in poverty, according to a 2018 report by the Victorian Council of Social Service, while the figure is even higher in Werribee, with 21 per cent living below the poverty line.

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“These people are vulnerable, often on Centrelink or at risk of homelessness, and they’re taking out loans to help pay their rent, buy food or keep the electricity on,” he said.

Mr Nelthorpe said in Werribee, where there are four payday lending businesses within 500m of the train station, there was a significant number of people who regularly borrowed from payday lenders.

WEstjustice chief executive Denis Nelthorpe.

Such loans are tailored toward people who need money in a hurry — people often already experiencing financial stress — and come with eye-watering interest rates.

Mr Nelthorpe said tougher regulations needed to be imposed on payday lenders to prevent vulnerable people from being sucked into a debt spiral.

He said a WEstjustice legal advice clinic for patients at a mental health unit in Werribee found 23 per cent had a payday loan and of those, 25 per cent had more than one.

Lenders were too quick to stump up cash to people who couldn’t afford to repay it, he said.

“There is simply just not enough work done by these people to determine whether people can really afford (to borrow money),” he said.

“We’ve found there are quite significant numbers of people in Werribee who said they were struggling financially and they’ve gone in to borrow money just to get by.

“We also had one client who said he used the money for gambling.

“The evidence is pretty overwhelming that (payday lenders) are not that interested in people’s welfare and not that interested in whether or not they can pay, it’s all about getting the money (through interest).”

It comes as the findings of a senate inquiry into credit and financial services targeted at Australians at risk of financial hardship were handed down last month.

The inquiry was scathing of payday lenders and rent-to-buy companies, calling for them to face tougher regulations and better consider the needs of struggling families.

“Often these products appear not only to have been targeted at Australians in financial hardship - they seem to have been designed to take advantage of them,” the report found.

The federal government in August 2015 promised new laws to protect the most vulnerable from these “debt vultures” but the legislation is yet to be introduced.

Lalor federal Labor MP Joanne Ryan said three and a half years was “plenty of time” to put reforms in place.

“The number of people being exploited in the electorate of Lalor is alarming, but not surprising when you consider we have four payday lending shopfronts within 500m of the Werribee train station, conveniently located so that these lenders can catch vulnerable people in their net,” she said.

Labor has since introduced its own Bill to target companies selling payday loans, which Ms Ryan said would protect those in financial hardship from being squeezed by unfair loan arrangements.

“It is hard to imagine the added layers of stress and anxiety being caused to our most disadvantaged when I contemplate their illness compounded by a debt spiral,” she said.

“This snapshot in Wyndham raises questions about the prevalence and impact of payday lending across the country and is worthy of further research.”

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