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Quick-fire lenders under scrutiny

Monday, 22nd October, 2018

Local Lifeline Financial Counsellor Sherrie Wilkins. PICTURE: Callum Marshall Local Lifeline Financial Counsellor Sherrie Wilkins. PICTURE: Callum Marshall

By Callum Marshall

Local financial counsellors have welcomed a Senate push to give ASIC further powers in dealing with pay-day lenders and other ‘buy now, pay later’ schemes.

Online lenders - such as Zip Money, Zip Pay and Afterpay - have been used by almost 7 per cent of Australians over the last year, according to recent Roy Morgan data, a figure helping to signify an increased use of digital financiers across the country.

Local Lifeline’s Financial Counsellor Sherrie Wilkins said the industry was causing significant damage within our community.

“I’m seeing a definite increase in clients with pay day loans. It’s increased because of the internet and how accessible it is,” she said.

“When I first started thirteen 13 ago there wasn’t a lot of pay-day lending going on, and they didn’t have (much) access into Broken Hill.

“Now that it’s all online though and you can easily borrow the money, I’m seeing a lot more coming in.”

Sherrie said she understood why many were going to pay-day lenders, because of how quickly they could provide money and the ease of it all, but was concerned people weren’t aware of how dangerous they could be. 

“If you go to a bank and you want to borrow two thousand dollars or under they’ll say ‘get a credit card’, which means you have to be accredited and checked to see that you can afford it,” she said.

“But if you go to a pay-day lender and you borrow a small amount of money, they’ll be very happy because they’re repayments are high and they don’t take anything into consideration.

“A person on really low income could end up paying 40 to 45 per cent of their income back to a pay-day lender, so, therefore, they can’t afford it.”

A big issue emerging with pay-day lenders was how easily they accessed an individual’s personal banking information.

“One of the practices they’re doing, which scares me very much, is because they’re supposed to check people’s bank statements, I have heard of people sending their internet banking log-in to them so they can look it up for the person,” she said.

“People say ‘they were so good, I didn’t even have to go to the bank (and) they did it for me’ and I say to them, ‘change your password now.’

“It seems attractive because the people that get the money from them can’t get money from legitimate banks. But while it seems to help at the time, it doesn’t.”

She said another common issue was that people often paid off one lender’s loan with money from another, creating a horrible cycle whereby an individual becomes indebted to multiple pay-day lenders.

“When people run afoul of a lender (and) they have massive interest, what they do is go to another pay-day lender which pays back the first one but then gets (them) into further trouble,” she said.

“It’s very common for people to have eight or nine loans going because they’re forever (in debt) and they never really end up paying anybody. They just end up losing all their money all the time. 

“But the criteria (for these lenders) are so low (and) it’s not meant to be. It’s not fair and it should be tightened up to protect the vulnerable. 

“There’s supposed to be a cap on the interest rate (but) it’s really hard to police because some organisations that lend money, when things get really tight with them, they close up and come back with a different name. This is why it’s been hard for ASIC to chase.”

That job could now become a whole lot easier though, thanks to news that the Senate is pushing to give the regulator further powers against pay-day lenders. 

“I certainly welcome ASIC getting more powers to look at pay-day lenders,” said Sherrie.

“They need to stomp it out so it’s unattractive for new companies to open up.

 “There will always be a niche for it (and) there will always be a market for it, but let’s make sure there’s strong protections in place. 

“People need to borrow money and they need to pay it off. You don’t get anything for nothing and I accept that, but let’s not have these loan sharks come out and not give any consideration to people’s lifestyle, their problems and their financial situations. So I want ASIC to really hone down on it.”

Sherrie’s comments were echoed by Vinnies Broken Hill regional president Leo Woodman. 

“We welcome ASIC’s involvement with open arms,” he said.

“For us, I’d say there’s a noticeable percentage of our people seeking assistance who’ve been engaged with pay-day lenders. 

“What usually happens is they’ve been involved with them before they get to us and we try to assist them financially so they can repay the lenders and get out of that circle of paying back all their money.

Leo said that, like Sherrie, he understood why people are attracted to pay-day lenders but if they are in trouble there are much better options available to them.

“There are many different reasons why people need money instantaneously, to pay for a debt they’ve incurred and they thought they could pay for, and all of a sudden they can’t,” he said.  

“Hence why they go to pay-day lenders (who they believe can) get them out of that situation they shouldn’t have gotten into in the first place.

“But if people are in a situation where they are beyond their means, just seek help. Whether it be Saint Vincent De Paul, Salvation Army, Lifeline; we’re all there to help.” 

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