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Action needed on payday lending.



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MINISTER FOR FINANCIAL SERVICES AND REGULATION

NO. FSR/023

Action Needed On Payday Lending

The Minister for Financial Services & Regulation, Joe Hockey, today urged all States to take action on the insidious practice of payday lending.

Payday lending is a form of finance where consumers borrow small amounts of cash then pay it back before they next get paid, at grossly inflated rates of interest.

"On 8 November 2000, I wrote to the Ministerial Council on Consumer Affairs urging all States to take prompt action and five months later little has happened," the Minister said

A payday lender's fee might be $20 per $100 dollars advanced. If the loan is for one week, the effective interest rate on that loan is 1043% a year.

Currently, the Uniform Consumer Credit Code, which is the responsibility of States and Territories, does not apply to loans of less than 62 days. But payday lending is usually for a few weeks and not caught by this law.

There are around 80 payday lenders in Australia and one study says this could grow up by up to ten times in as little as five years.

The Minister wants to see:

payday lending brought under the UCCC by the States; ● disclosure of all payday lending loan details including terms and the effective interest rate on the payday loan; and, ●

uniformity among States on any cap on interest rates. ●

"I want all States take immediate action to protect consumers.

"Payday lending is an insidious practice that targets the less prosperous men and women of our society, the less financially savvy and the people who can least handle spiraling debt.

"Payday lending is part of the twilight zone of Australian finance. As such, it needs to be reformed so that Australian men and women get the full picture and don't sign up for a loan that leaves them in financial strife."

3 April 2001

Media contact: Matthew Abbott, Minister's office, 0413 07 62 13.

 

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