An Australian fringe lending company is introducing payday loan “kiosks” which look like ATMs into Queensland shopping centres, a move that financial counsellors say could put financially vulnerable families at greater risk post the holidays.
A new City Finance payday loan electronic kiosk, located together with mainstream bank ATMs in the Centro Lutwyche shopping centre in Brisbane’s inner city suburbs, promises shoppers it will be ready to approve $300 to $3000 cash after a 60 second personal loan assessment. The kiosk has yet to be activated.
Fiona Guthrie, Executive Director of Financial Counselling Australia (CFA Member), said the new instant loan machines could tempt struggling families into a high-cost debt trap and showed that the responsible lending laws do not work for payday lending.
“Australia’s responsible lending laws say that before a lender makes a loan they need to make an assessment about a borrower’s circumstances and their ability to repay the loan without substantial hardship. It’s hard to see how a 60 second assessment at a shopping centre kiosk could do this,” said Ms Guthrie.
“Many families are finding it hard to manage their weekly shopping trip on a tight budget and these machines could be tempting. People should be aware that payday loans come with extremely high costs. Many people find themselves in a debt trap after taking out a payday loan.”
Despite a recent report by the government watchdog, ASIC, into the payday lending industry which found substantial non-compliance with the responsible lending laws, fringe lenders are fighting to block proposed new payday lending laws introduced into Parliament by the Federal Government last year that would impose a national cap on the cost of payday loans.
Ms Guthrie said that Queensland imposed a cost of credit cap in 2009 but that this cap is due to lapse once new Federal laws are passed. It is unclear if the new kiosks are being installed in anticipation of the Queensland laws lapsing.
“Payday loans have been shown to be a dangerous product because they create a debt cycle – their high cost and short repayment term leave borrowers short of money and needing to take out more loans to continue to make ends meet. It is irresponsible to try to make high cost payday loans part of the weekly grocery shopping trip.”
“The only laws that have been proven to provide some protection from this debt trap are caps on the cost of short term loans. We need national caps in place before these kiosks, and possibly other new lending techniques, are rolled out and activated in shopping centres across the State and the rest of the country.”
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