PAY DAY LENDERS - WHAT WE WANT

Pay day lenders  exploit vulnerable or low income consumers. We want amendments to the Uniform Consumer Credit Code that will:

• cap interest rates at 48% (such a cap already exists in New South Wales, Victoria and the A.C.T.)

• for the purpose of the cap, ensure that all fees and charges are included as if they were interest (New South Wales and Queensland have amended the UCCC along these lines, but other states have yet to follow suit).

BACKGROUND

Pay day lenders offer short term loans, at very high cost. For example, a typical loan taken out by a consumer may be $200 to be repaid in two weeks (at the next 'pay day'), for a fee of say $50.

Most pay day lenders charge fees, rather than interest. Of course the fees are really just interest in disguise. When all fees and charges are taken into account, the annualised interest rates on pay day loans can vary from 250% to 2,500%.  The cost of credit is therefore enormous.

Research conducted both in the United States and in Australia, indicates that most pay day loans roll over between 8 - 12 times. In other words, they are rarely sources of short-term finance.  Consumers ultimately end up paying enormous amounts.

Click here to go to the pay day lending research conducted by the Consumer Law Centre of Victoria in 2002. It is an outstanding and unique piece of research.