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The Federal Government is being urged to move swiftly and toughen laws covering the payday lending industry and consumer leases.
Key points:
- Consumer leases can see customers pay far more than items are worth, and payday loans attract high interest rates
- A 2015 review made a series of recommendations for changes to laws, but consumer groups are frustrated the Government has yet to legislate changes
- The Government has told the ABC the legislation will be introduced and debated this year
A coalition of consumer groups, including Choice, Consumer Action Law Centre and Financial Counselling Australia, are in Canberra today to lobby for urgent legislative changes.
"Consumer leases and payday loans are often targeted at the most vulnerable consumers in our society," said Tom Godfrey from Choice.
"What we need in Australia are tough laws that prevent these loan sharks targeting people who quite frankly can't afford to make these repayments."
Payday loans, also known as cash advances, are usually less than $2,000. They typically charge high fees and interest rates, and are offered by companies like Cash Converters and Nimble.
But low-income earners who use these loans to make ends meet can be caught up in a debt spiral with big repayments.
Consumer leases, which are commonly offered for household products like fridges and televisions, can see customers pay four times the regular retail price of the item.
Under a consumer lease, the customer does not own the item at the end of the contract.
Government confirms legislation to be debated this year
The 2015 Small Amount Credit Contracts (SACC) review made a series of recommendations for changes to laws.
The Government has agreed to most of the SACC recommendations, but consumer groups are frustrated it has yet to legislate any changes.
"The top of the list is limiting the payday loan or consumer lease repayments to 10 per cent of a consumer's net income," Mr Godfrey said.
"Also requiring equal repayments over the life of a payday loan, prohibiting a monthly fee if a payday loan is repaid early, and banning unsolicited offers of payday loans to customers."
A spokesman for the minister responsible, Michael McCormack, has confirmed he will meet with the groups in Canberra.
The Government told the ABC the legislation would be introduced and debated this year.
A spokesman said the Government was committed to balancing access to small amount consumer contracts and consumer leases with appropriate levels of customer protection.
The Consumer Household Equipment Rental Providers Association (CHERPA) previously said it was working hard to eliminate rogue operators and enforce a stringent industry code of conduct.
Last year, Australia's biggest payday lender Cash Converters was ordered to pay fines and refund consumers millions of dollars in loans because it breached responsible lending provisions.
But the corporate watchdog has been criticised for its investigation into the business, with consumer advocates saying many other people who will not receive refunds are suffering.
Topics: business-economics-and-finance, government-and-politics, australia