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Payday loans: Why is usury permitted?


Choice should do an expose on payday loans. They currently claim they don’t charge interest. Instead they charge an establishment fee (20%) and a monthly service fee (4%).

That means per year you’d be paying around 68% interest. This is a usurious rate of interest.

Why isn’t someone doing something about it?

Payday loans in the news:


This is an exceedingly brief comment on the industry.

Did Choice write anything a bit more significant on the issue?


Hi @mc1, thanks for the comments. We’ve done a few articles over the years on ‘payday’ lending, including giving the entire industry a Shonky in 2015 and calling out Cash Converters for its lending practices. There’s more to do, and we appreciate the suggestions. If you have an experience or a story you’re willing to share, please feel free to leave a comment here.


The problem seems to have increased and got worst in recent years.

The article I linked back to mentioned the Shonky award in 2015.

From memory the law prohibits lending at over 25% interest… but leaves a loophole for amounts under $3000.

These payday lenders are trading in this area.

Lenders are also calling costs everything except “interest” in an effort to get around the legal definition of interest.

While this may be within the letter of the law surely it was never intended to permit such practises?

Usurous lending is unethical. We know it’s impacting the poorest hardest. Why don’t we do something to clean it up?



We’re all personally affected by the consequences of usurous lending practises: people living on the street, more poverty, crime, great demands on government services (higher taxes), etc…

Whether we realise it or not?

What happend to the “Common” in Commonwealth? Wasn’t it meant to include us all?



Payday lenders in the news again:

Payday lenders are asking applicants to share their myGov login details, as well as their internet banking password — posing a security risk, according to some experts.


One for a Shonky. There are Instant Cash Loan machines being placed in areas of NSW. You provide ID and Bank details and very quickly can be approved. Value of the loans are from $50 to $1,000 and users can increase their limits the more they access the machines. Users have between 1 to 3 months to pay the debt back. Ok my take on it is it is just Bad Bad Bad and Really Bad.

The article about this:


Thanks @grahroll, pretty Shonky stuff if you ask me!


I just saw this company advertising on TV last night and out of interest I googled them. I was horrified to learn of the fees they charge and the misleading way they state that they don’t charge interest…just fees of 4% per month though!!!
It was very hard to find an online loan repayment calculator, but I finally found the appropriate Payday loan calculator on the MoneySmart site. …so $1000 loan over 12 months costs $680 in fees and interest.
Surely these loan sites should have some sort of loan repayment calculator link on them…I couldn’t see one on this Sunshine one.
Wallet Wizard have their own dodgy repayment calculator, but no loan term is specified! I’m guessing it’s a year. They also indicate how much cheaper they are compared to others…but still charge 48% interest. They even have a default fee of $5 per day…" to cover reasonable costs of administering your account while
your account remains in default". So that default fee quickly adds up to $150 month.
I get nervous just being on the site…scared I might accidentally apply for a loan !! :fearful:


The Netflix “Dirty Money” documentary describes one US Payday lender in detail:

However it’s exactly the same model being used in Australia. If it’s illegal there… why isn’t it illegal here too?




A couple of articles regarding payday lenders.

I found the comment by NCPA chairman, Rob Bryant that they are sick of being treated as pariahs most amusing and it reminded me of the joke.

“What is the difference between a catfish and a payday lender?
One is a slimy, scummy bottom feeder. The other is just a fish.”



Great articles… glad someone is making some noise about it.



The Federal Government has delayed reform on pay-day lending for over three years.

Our friends over at Consumer Action Law Centre have been advocating for much stronger consumer protections.

Here is an article they wrote back in June about the delays:

Sadly, still no laws have been passed.


I think part of this issue is the political power these large financial businesses have. Similar in many ways to the inactivity that was taken re Banks, Superannuation until the Royal Commission. But just like the RC I think if any legislation was forthcoming it would be weak in it’s effects on poor behaviour while pretending to have really good outcomes for the public.


ASIC is investigating share trading in Afterpay and Zip after their shares fell ahead of the public release tomorrow of the report regarding possible regulatory changes.

Ok. Move along folks. Nothing to see here. They just have ESP.



An article regarding the dilemma Townsville flood victims are findind themselves in.

Surely Governments should be providing more assistance instead of leaving the most disadvantaged to the “mercy” of the payday lending grubs.



A Senate committee has recommended changes to regulate the payday lenders and appliabce rental sharks.



Long term goods rentals should be considered a financial service imo. Agencies should be legally required to ensure the repayments are manageable for the client and that they are not encouraging them to take out something they can’t afford.


Lets assume all long term rental contracts can be cancelled without fees after some minimal period, so if the cost becomes unmanageable the goods can be returned and the rental contract terminated. <- not always the case today, but for the discussion assume that is a potential solution.

If that was mandated at what point are people absolved from taking responsibility for their own actions as well as understanding their financial situation, and at what point might a business be expected to take responsibility for unforeseen problems in their customers’ lives?

A difference between a rental and a loan is who owns the merchandise and at what point during the contracted term. I submit they are not the same. A number of rental companies have been found to have conducted themselves poorly, but not because of manageable payments, because of unfair terms or obscene ‘interest equivalents’ whereby the actual cost to own has been multiples of the original value, often including a balloon payment at the end for the customer to have ownership.

How would ‘encouragement’ be established as a point of law if the customer had a hard row and decided what he thought was a helpful salesman might have ‘encouraged’ him to over-extend?

Tipping all responsibility from customer to vendor is a slippery one, although holding businesses to standards of honesty and integrity in their dealings should be a given.