Midlas reports local increase in clients caught out by payday lending loans


Financial Counsellor Taryn Benn from Midlas talks to local resident Natasha. Picture: David Baylis
Financial Counsellor Taryn Benn from Midlas talks to local resident Natasha. Picture: David Baylis

A LOCAL financial counselling service says it is seeing an increase in the number of clients caught in a debt spiral because of payday lending loans and rent to own plans.

It comes after the WA Council of Social Service, the Financial Counselling Network, WA No Interest Loans Scheme and the WA Financial Counsellors’ Association called for urgent action by the Federal Government to provide better protection for people who have taken out payday loans.

Midland Information, Debt and Legal Advocacy Service (Midlas) chief executive Justine Clark said closely related to payday lending was the alluring problem of rent to buy.

“People without a lot of disposable income see it as a form of ‘get now, pay later’ almost-layby when in reality it can lock them into financial hardship for years,” she said.

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“A small sample of comparative prices done by Midlas in 2015 showed that the difference between identical items bought retail versus rent-to-buy could be as high as five times the price.

“A $400 television could be ‘rent-to-bought’ for $2,700.”

Financial Counsellors’ Association of WA executive officer Bev Jowle said the findings of the national Small Amount Credit Contract review were released last year and the Federal Government needed to move quickly to enact them.

“Capping loan interest rates at 48 per cent for all credit providers, including pay day lending and consumer leases should be a priority,” she said.

“The ease of lending also needs to be addressed to ensure people are clearer about the terms and conditions of these loans and leases.

“Advertisement of the interest rates and comparison rates should also be compulsory so borrowers are aware of what is expected.”

Financial Counselling Network spokeswoman Celia Dufall said a client referred to them by a mental health service provider had suffered significant financial distress after receiving a pay day loan despite the fact it should have been clear he was unwell.

“Often clients feel trapped and have no other choice and are quickly caught up in the vicious cycle of repeat borrowing, often losing personal items of value just to get by,” she said.

“With expensive establishment and ongoing fees often low income borrowers cannot afford to pay back and unfortunately, payday lenders are taking advantage of the disadvantaged.”

Ms Clark urged people to seek free financial advice prior to considering pay day loans or renting to buy.

“If you’re on a Centrelink income hit the brakes and look at your alternatives first,” she said.

Ms Clark said also concerning, but less publicised, was an increasing trend of non-payment of shire rates.

“Some people honestly don’t realise how dangerous that can be with penalty interest and the seizure of goods and property can and will eventuate,” she said.

“Most who present to Midlas with this problem just don’t have the mindset of putting aside for this highly predictable bill.”