Inquiry Underway As Loan Sharks Target Stressed 'Back-To-School' Parents
Broke parents struggling to find the cash to send their kids back to school are being targeted by loan sharks.
“The choices mums are making where they have to get food on the table or shoes on their kids,” said Peter McNamara, CEO at Good Shepard Finance.
Organisations set up to help those in need say the problem is worse than ever and the most vulnerable are being targeted.
“More and more are coming to our services doing it tough, 40 percent of payday loans are going to single mums.”
Payday lenders offer amounts of up to $2000, that have to be repaid in a short timeframe with a high-interest rate.
Worse still, when loans are not repaid, customers get hit with default fees.
For example, a loan of $200 with a payday lender is likely to require $333.85 paid back shortly after.
When a customer cannot repay, that $200 can quickly turn in to a total amount owing of $1236, according to Financial Counselling Australia.
Labor's Jenny McAllister called a Senate Inquiry to investigate the issue.
“Payday lenders are very aggressive and often don't give consumers the full picture about how much they are going to be paying,” she said.
“Right now we are seeing a lot of advertising, targeting families encouraging them to take out loans.”
The inquiry will hear evidence in Brisbane all week and Senator McAllister hopes it will force the Government to finally act.
“Everyone knows what the solutions are we are just waiting for the Government to implement them.”
The Government investigated making changes in 2015 and almost introduced laws in 2018, but that was stopped by an internal party revolt.
It is widely reported that now Assistant Treasurer Stuart Robert was among those who opposed the proposed changes.
Mr Robert told 10 News First the Coalition is considering changes, but will not act until after the Senate Inquiry findings are revealed next month.
“The Government will carefully consider its findings, along with any commentary from the final report of the Financial Services Royal Commission,” he said.
“The Morrison Government recognises that small account credit lenders and consumer lease providers play an important role in the economy by providing credit to consumers who, in many instances, are unable to access mainstream forms of finance.”
Until changes are made, the best advice is to look at options such as free financial counselling and even help from charities.
“The best option is to see out a free financial counsellor because they can offer independent advice,” says Senator McAllister.
Good Shepherd Finance offers no-interest loans of up to $1500 for people who do not have access to traditional types of credit through banks.
McNamara encourages any struggling parents to use the service.
“The no interest loan scheme is quite basic. It is a safe, fair, affordable alternative, there are no fees it is for people who are doing it tough,” he said.