Payday Loan Seekers Urged To Hand Over Bank Passwords, Survey Heard | Business

Vulnerable Australians agree to share their banking passwords on the internet so payday lenders can see their transaction history before lending them money, according to a survey.

The practice places the poorest Australians in violation of the terms and conditions of their transaction accounts, leaving them at risk from unauthorized access to their bank accounts by third parties, financial advisers have warned.

A new parliamentary inquiry began to scrutinize the behavior of payday lenders, buy-it-now and late-payment businesses, and credit repair agencies.

The investigation was opened to allay concerns that payday lenders and other financial services to Australians at risk of financial hardship had escaped the glare of the Royal Banking Commission.

Fiona Guthrie, chief executive of Financial Counseling Australia, told the inquest on Wednesday that laws passed in 2013 to protect payday loan recipients had not prevented “large scale irresponsible lending.”

She said most Australians who had accessed payday loans were pushed further into financial difficulties.

“The industry can say this has been fixed, but it’s not our experience,” she said.

“And that’s not the experience of the regulator, which continues to have to take regulatory action against payday lenders and option-to-buy rental companies.”

The Financial Rights Legal Center told senators that payday lenders use third-party service providers to electronically access a client’s bank account details, putting clients at risk.

He said that under responsible lending requirements, lenders are expected to review a borrower’s recent bank statements.

But rather than asking a customer to bring a physical bank statement, they asked customers to provide their passwords online to a third party so that their bank accounts could be viewed remotely.

He required customers to violate the terms and conditions of their transaction accounts.

However, an organization representing some payday lenders denied that the highly regulated industry has a problem following the rules, instead highlighting unregulated credit providers.

National Credit Providers Association President Robert Bryant said his heavily regulated industry, which provides payday loans officially known as “Small Amount Credit Agreements” (Saccs), was not the problem. . (Small amount credit contracts are contracts with a maximum credit limit of $ 2,000 and a maximum term of 2 years).

Bryant said many of the examples of irresponsible lending highlighted by Financial Counseling Australia involved unregulated credit providers and that he was fed up with his industry being twisted.

“The use of the word ‘payday loan’ has been very effective in drawing attention to all that is bad in consumer credit: consumer leasing, pawnshop, buy now-pay later , and more, ”he said.

“This is not the Sacc industry that we represent… this misrepresentation of our well regulated industry is seen in every bad consumer lease story.”

He said regulations were a priority for lenders subject to them, and the same rules should be extended to unregulated providers. He also rejected the suggestion that his industry had a compliance problem.

The probe comes after Michael McCormack, who is now the leader of the Nationals, introduced legislation in the Federal Parliament in 2017 aimed at strengthening payday loan protections, but which Labor and Greens complain has stalled in the Parliament.

The bill will cap total payments on consumer leases and require all small-value credit contracts to have equal repayments and payment intervals, but some industry players have opposed it.

The Association of Household Equipment Rental Suppliers for Consumers says it supports capping the amount customers can be charged for the rental of household consumer goods.

However, he opposes the bill’s proposal to impose a maximum cap of 4% per month on the recommended retail price of a leased property, saying this is “far too low” and will shut down the sector. overnight consumer leasing.

He says that for a 12-month consumer lease, a business should be able to charge double the value of a property. For a 24-month contract, the maximum limit must be three times greater than the value. For a 48-month contract, the cap must be four times greater than the value.

He argues many costs to the lessor beyond the simple cost of the leased goods, including delivery, maintenance and upkeep costs, as well as the GST, he claims.

Consumer Household Equipment Rental Providers’ Association president Stephen King appeared before the inquest on Wednesday.

Labor Senator Jenny McAllister asked him if he could justify charging someone four times the value of a refrigerator by Christmas 2022.

King replied, “I could justify it if you go away for four years, but we won’t put you on a four-year contract unless there is a real need to.”

“In other words, if you really needed a particular product and the lease needed to be extended for four years to make it affordable… with a lower payback value over a period of time.”

With Australian Associated Press

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