One of Australia’s most ethically contested industries – the payday lending industry – faces a cleanup by regulators as investigations are launched into a series of illegal lending practices.
Revelations on ABC Four corners A scheme whereby lenders provide loans to drug addicts and those already in debt have sparked an outcry from community lawyers for tighter credit laws.
The federal government will review the effectiveness of existing legislation in June, but in the meantime, ASIC is investigating allegations that three payday lenders manipulated credit scores to approve loans to borrowers with limited capacity to repay the debt. debt.
While current laws are supposed to prevent lending to borrowers who are still paying off other loans, several lenders in Melbourne and Sydney appear to be exploiting loopholes to increase their credit volumes.
Payday lenders have a legal obligation to reject applicants who still repay multiple loans, but ASIC is currently investigating cases where desperate borrowers took more than 10 loans in a year.
The industry is also being held to account for the permissive lending policies that have helped heroin addicts continue to fuel their habits.
Pressure mounts on government and Westpac
With the loan law review slated for mid-year, community lawyers are pushing the federal government to curb the industry by tightening restrictions and increasing criminal penalties.
They are also calling on Westpac to sever ties with the biggest players in the industry – Money3 and The Cash Converters.
While other major banks refuse to provide funding to payday lenders, Westpac continues to support their operations with wholesale funding.
The bank boasts on its website that corporate responsibility is not an addition or a supplement to the “nuts and bolts of our business”.
And he goes on to say that “for our company to be truly sustainable, corporate responsibility must be part of the very fiber of our company, of our DNA”.
If all of this is true, why is banking such a vital part of the payday lending market?
Social Ventures Australia’s decision is an embarrassment
Westpac consistently ranks as Australia’s most socially responsible bank.
The last award the bank received came from Money magazine in June of last year, even though Westpac was known to be a big supporter of the payday lending industry at the time.
The jury included Social Ventures Australia Executive Director Ian Learmonth, who highlighted Westpac’s support for a $ 100 million scholarship program as “setting a new benchmark in corporate sponsorship”.
It is not clear whether Mr Learmonth and the other judges took into account the fact that most banks, run by the National Australia Bank, refuse to deal with payday lenders on principle.
Westpac’s links to payday loans also seemed to count for little in the minds of international judges who ranked the bank among the 100 most sustainable companies in the world last year.
Most Australians don’t like payday lenders
A survey of public attitudes towards payday lenders found that only one in five Australians viewed the industry positively.
An alliance of community legal centers and consumer advocates sponsored the national survey.
The survey found that 77 percent of respondents would support legislation limiting the fees and interest payday lenders could charge borrowers.
And 83% of those polled said they did not approve of payday lenders being able to access borrowers’ bank accounts to ensure they receive priority payment over the client’s other living expenses.
Sponsors for the survey included CHOICE, the Melbourne Consumer Action Law Center and Good Shepherd Microfinance.
Adam Mooney, CEO of Good Shepherd Microfinance, said the human impact of payday loans was damaging everyone in Australia.
He advised those in desperate need of financial support to consider taking out an interest-free loan backed by state governments and the National Australia Bank.
“Instead of paying up to three times the value of a refrigerator, cabinet or bed through a secondary lender, just pay the cost of the item itself over 18 months with an interest-free loan, backed by the Australian and state governments and the NAB, ”he said.