YOUNG Australians are being warned not to fall for payday lenders on social media this Christmas.
New research from Monash University released on Friday found 86 per cent of payday lenders use social media to target young people.
“Payday lenders have many followers and fun social media profiles,” Monash Business School’s Vivien Chen said.
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READ NOW“Their posts include finance tips, cute pictures and they engage in socially-responsible activities. Yet among these posts, the lenders promote their loans.”
The report said young people in particular are emotionally susceptible to payday lenders’ advertising when scrolling through carefully-curated pictures of celebrities and friends alike donning the latest trends, eating at the best restaurants and visiting exotic destinations.
“At times like this, the offer of a payday loan to fund a holiday might seem very attractive – particularly when the lender appears to be helpful, friendly and responsible,” Dr Chen said.
Existing laws do not require risk warnings on social media sites, she added.
Payday loans, or small amount credit contracts, are short-term, high-interest loans for amounts up to $2000.
Lenders can charge annual interest rates of up to 400 per cent and are often used by people in financial stress, trapping them in a cycle of debt.
Despite the dangers associated with payday loans, more than 4.5 million loans were taken out in the last three-and-a-half years, totalling about $3.1 billion.
The data, released by the Stop The Debt Trap alliance last month, found about 15 per cent of borrowers go on to fall into a debt spiral which can have serious consequences including bankruptcy.