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.