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.
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.
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 !!
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.
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.