Credit reforms pertaining to short term loans are to be independently reviewed in July of this year. As the time of their examination draws nearer those who oppose the practices of loan-sharks are exposing the shadier side of the industry.

In 2013 reforms were introduced to strengthen customer protections. But Gerard Brody believes these have had exactly the opposite of their intended effect.

The regulations stipulated a maxmum of 20 er cent could be charged on loans of less than $2000, plus a 4 per cent establishment fee for the life of the loan.

However, those borrowers who couldn’t meet their repayments found themselves embroiled in a whole other set of dishonour and late payment fees.

M Brody uses the example of someone borrowing $1200 from online lender Nimble. A 30-day loan will cols $226 in fees and interest. But exceeding the principal repayment date by two weeks will incur a dishonour fee of $35 and a $7 per day default fee while the loan remains outstanding.

This adds up to an extra $133.

In essence the borrower would have paid $1669 for a $1200 six-week loan: An outrageous 39 per cent!

And this is not an isolated incident.. Opponents to payday lenders (lenders willing to extend credit on the assurance of a payday cheque) have been found charging up to 300 per cent when compared to an annualised rate. Low-income earners quickly find themselves in a debt spiral from which they are unable to emerge.

Cash converters, Australia’s largest payday lender, announced last week a 20.5 per cent increase in its half-year revenue to $187.7 million. Trade, they said, had been ‘record-breaking’ during December – driven, most likely, by people  desperate to ennoy Christmas.

Personal loans through Cash Converters increased by 25.5 per cent, to a staggering $23 million, while cash loans increased by 7.7 per cent to $24.2 million. Much of this increase in trade was put down to Cash Converters’ new online and mobile business.

Australia’s second largest lender, Money3, reported an astounding 86.6 per cent revenue increase for a profit of $63.6 million for the 2013/14 financial year.

About The Author

Someone you can depend on to respect you and care for your dog. Let me help you give your dog the life it deserves.

Leave a Reply

Your email address will not be published.