A BALLARAT charity has condemned payday loans as preying on the vulnerable, following the release of a government discussion paper aiming to tackle the practice.
At present Ballarat has six payday loan providers within a one kilometre radius of the Bridge Mall.
The cash loan centres sport slogans such as “real people fast cash”.
But the short-term loans come with high interest rates, and many have fixed repayment timeframes.
When The Courier contacted Cash Converters yesterday, it was told short-term loans paid off over a month were charged $35 per $100 loaned, while six month loans incurred an interest rate of 48 per cent per year. The size of the loan available depended on the income of the consumer.
UnitingCare Ballarat executive director Cliff Barclay said the agency had received regular visits from people hit hard by payday “traps”.
“The fact that people need to pay these extraordinary interest rates to get by until the next pay cheque shows how tough people are doing it,” he said.
“People shouldn’t have to pay that much interest for that amount of support, it’s a trap. And when most people get caught in a trap there’s no way out of it.”
Bill, a 57-year-old Alfredton man, said he had used loans from a payday lender eight times in the past year because he often couldn’t afford to buy food.
“I feel sorry for the people who have to use (payday lenders) like myself, but my argument is about the interest they’re charging,” he said.
“They’re preying on the people who need it the most.
“(Payday lenders) don’t care what the interest rate is, they’re just worried you won’t pay it back and if you don’t they’ll hit you with everything they’ve got.”
Under current regulations, a payday loan must be assessed according to a consumer’s capacity to repay.
If consumers default on their repayments, they have a statutory right to request a hardship variation which the lender must consider before commencing enforcement action.