Payday loans targeting the desperate, says Salvation Army report

The Federal Government has already agreed to act on dangerous payday loans, but more than 1000 days later, nothing has been legislated.

Charity and consumer advocate groups have called on the Federal Government to follow through on promised legislation to regulate payday loans after a new report found vulnerable Australians were still being targeted.

Consumer Action Law Centre chief executive Gerard Brody says it has now been more than 1000 days since the Morrison Government accepted recommendations of its own review into the harmful products.

“It would be really significant to get these reforms passed,” he told news.com.au.

“They would limit repayments on a payday loan to no more than 10 per cent of someone’s net income for the fortnight period.

“That would mean these loans don’t disappear from the marketplace, they would still be available for that one-off emergency.

“But it would make it less likely that people will end up reliant on them or getting multiple loans at once where the repayments end up being a very high proportions of their income, such that they can’t afford to pay the basics such as housing costs, rent, food utilities.”

RELATED: Financial experts warn of the dangerous trap of payday loans

The Salvation Army says many recommendations made at the beginning of the year by two major inquiries into the banking and financial services industries still haven’t been acted on.

“What we’re seeing is very little change since the royal commission and the Senate inquiry,” financial counsellor Kristen Hartnett said in a statement.

“Even though there were a lot of recommendations, on a day-to-day basis what’s presenting is the same.”

The economics committee inquiry in February recommended payday lenders and rental companies face tougher regulations and better consider the needs of struggling families.

The inquiry said payday loans had been offered at rates of between 112 and 407 per cent.

The banking royal commission, which published its conclusions in the same month, proposed a raft of measures designed to better protect consumers, including banning unsolicited cold calls or “hawking” of insurance products.

But Ms Hartnett says the Salvation Army is still seeing instances where much-needed household items like washing machines are bought for $600 but end up costing $3000 due to high interest rates.

She said more than 1500 people had come to the Salvation Army’s Moneycare service for financial advice last year, while more than 30,000 calls were received.

The Salvation Army’s Moneycare head, Tony Devlin, insists vulnerable and desperate people don’t need a payday loan or a “buy now, pay later” scheme.

“What is needed is financial counselling such as that offered by Moneycare which is holistic in its approach, which focuses on working with the person as a whole and builds long-term financial capability and resilience,” he said.

Mr Brody says it’s time the Government followed through with legislation to reform the sector. Picture: Stuart McEvoy / The Australian.

Mr Brody said the unregulated existence of dangerous payday loans meant “people are living in poverty”.

“People literally don’t have enough money in their budgets to pay for their essentials of life, to pay for food and to ensure they can keep a roof over their head,” he said.

“The way in which the repayments are structured and the high costs associated with these loans means it just sucks money out of the budget of people who are already in financial difficulty.

“We need to make these products safe and the best way to do that is to pass these reforms to limit the amount lenders can take from someone’s fortnightly income.”

— with AAP

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