No move on payday lenders three months after reform pledge

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Vulnerable Australians are still dragged into paying exorbitant interest rates on payday loans and rented household goods, three months after the government pledged to get the industry back on track, according to consumer groups.

A government-commissioned study last year found that some customers were paying interest rates equivalent to 884% on merchandise under lease-to-own contracts, with one customer paying $ 3,042 for a clothes dryer worth of $ 345.

The government has promised to cap payday loan repayments offered by Nimble. Credit:Esther han

Revenue and Financial Services Minister Kelly O’Dwyer pledged in November to implement 21 of the 24 recommendations of the review, in part or in full. They included capping consumer rental charges at 4% of the commodity base price per month for up to 48 months and limiting payday loan repayments to 10% of the borrower’s income.

Gerard Brody, chief executive of the Consumer Action Legal Center, said low-income people are always trapped with expensive goods and often end up paying off multiple loans at once while consumer groups wait for reforms.

An alliance of consumer groups, including Consumer Action, CHOICE, Financial Counseling Australia, Financial Rights Legal Center and Good Shepherd Microfinance, will travel to Parliament in Canberra on Monday to demand that the reforms be passed immediately.

Revenue and Financial Services Minister Kelly O'Dwyer pledged in November to implement 21 of the 24 recommendations of the review, in part or in full.

Revenue and Financial Services Minister Kelly O’Dwyer pledged in November to implement 21 of the review’s 24 recommendations, in part or in full. Credit:Andrew Meares

“We welcome the government’s commitment to implement them. We just want to explain the real impact on people’s lives that the passage of this legislation will have.

Mr Brody said the small loan industry was pressuring parliamentarians against some of the measures, including the important “affordability” recommendation that would lower the ceiling on payday loan repayments by 20 percent of gross income. ‘a customer at 10 percent of their after tax. Income.

The change is designed to prevent customers from falling into a cycle of taking out multiple loans to meet repayments, which Brody says is common.

Consumer Action last week filed a Federal Court action against Radio Rentals on behalf of a customer who alleges the company signed a rental agreement to them without properly assessing whether they could afford it.