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Home / Business / Maxed-out credit cards no barrier for man accessing thousands in payday loans, inquiry hears

Maxed-out credit cards no barrier for man accessing thousands in payday loans, inquiry hears



Updated

January 13, 2019 16:13:54

Six credit cards with a maximum limit have proved not to be an obstacle for a man who has access to thousands of payday loans, a Senate investigation has been told in newly released documents.

Key points:

  • ASIC defines a payday loan as a short-term high-cost loan
  • The Senate inquiry received comments from social and governmental services that report, at a minimum, a need of change
  • Federal Department reported that the withdrawal of financial institutions from the short-term loan has fueled the market for small loans

The investigation, launched in October last year, was told dozens of horror stories of payday loans, with the declaration of the Federal regulator specifying that the practice shows "a risk of debt spirals" in over half of its client files examined.

Organization of the New Wales Financial Counseling Hunter Valley made a submission that referred to several case studies of people injured by payday lenders.

The service & # 39; S's manager, Maria Hatch, said in one case that a man ̵

1; referred to as AB – had a median income, was married and had a child, had six regulated credit cards without residual credit.

At that point

"He applied for a payday loan and was granted a loan of $ 3,000, then asked and was granted three more payday loans each of $ 3,000. He then asked for another payday loan and was granted a $ 800 loan, "Mrs. Hatch said.

Mrs. Hatch said that without the help of her service, the man would have lost his wife, his son and his job.

He said that another customer who escaped from domestic violence had received almost $ 15,000 in payday loans [19659008] "You were granted a loan of $ 6,000 for a car that was assigned to you" Mrs. Hatch said.

"He already had another payday loan for $ 8,500 for a car that had been amortized by an ex-partner accident."

High-cost short-term loan

The federal regulator of the Australian Securities and Investments Commission defines a payday loan is a short-term high-cost loan.

The commission says it includes small loans of up to $ 2,000 that must be repaid between 16 days and 1 year, as well as borrowed loans for longer periods.

The Senate investigation is examining the impact on individuals, communities and the broader financial system of operations of payday lenders and consumer leasing service providers.

It also focuses on unlicensed financial service providers, including "buy now, pay later" and short-term credit providers.

The Federal Department of Social Services used its request

"In the last two decades, financial institutions have withdrawn more and more financial products and services from low-income people or other people at risk of financial difficulties due to of the high cost of providing these services, "said the department.

"This has resulted in a small and appropriate credit shortfall for vulnerable individuals, leading to greater financial exclusion for people who are unable to access mainstream financial services.

" In the absence of appropriate alternatives, the market for small loans, or "payday loan", the leasing of consumers and other markets "buy now, pay later" have grown to meet this demand. "

Except for & # 39; s Alarmed by the peak of the payday loan

The Salvation Army told the investigation that the effects of payday loan to families can be disastrous.

"The Salvation Army sees regularly people in marginalized and vulnerable situations with this type of debt "

" It is one of the fastest growing types of debt with which our community members present.

"The proportion of community members who present themselves to our services with payday loans or consumer l facilities have steadily increased over the years, more than doubling
from 6% in 2008/09 at 13% in 2017/18

"Average values, after adjusting to inflation, tripled from $ 423 in 2008/09 to $ 1,383 in 2017/18. "

Legal Aid wants an action

NSW Legal Aid has also submitted a request, concerned about the exploited vulnerable people.

He highlighted the case of a woman referred to as Rachel. [19659008] "Rachel is a young, single, aboriginal and Centrelink mother from a remote community," said Legal Aid's statement.

"She recently left a relationship during which she suffered domestic violence.

Rachel entered seven payday loan contracts with the same supplier within a period of 13 months.

"Loan amounts ranged from $ 300 to $ 1,500," he said.

"Most of the contracts were entered on the day that Rachel completed the payment of a previous contract.

" Most of the contracts counted for all the contracts for all the contracts for over $ 2,500policies for the overpriced goods "

The Commission Australian securities and investment used its request to confirm a need for change:

"We examined 288 rows of payday loans and discovered that:

  1. In 54.2% of the files, the consumer had entered two or more small credit agreements (with this level of repeated use reflecting a risk of debt spirals); and
  2. In 7.6% of the files, the consumer was in default on another small credit agreement. "

The Senate inquiry committee will hold a second public hearing in Brisbane on January 22.

Topics:

money-and-monetary policy,

Welfare,

business-economics-and-finance,

Domestic violence,

Newcastle-2300,

Muswellbrook-2333

First published

January 13, 2019 15:52:48


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