Pay Day Lenders

Payday lenders offer short-term cash loans between paydays. Payday lenders must operate within the same laws governing other lenders. Payday loans are particularly appealing to people ineligible for a loan from formal institutions. Payday lenders lure customers with the promise of quick, easy and convenient cash, but often there are hidden traps, including exceedingly high interest rates, sometimes up to 70 times more than credit cards. Payday loans are marketed as quick and easy to obtain, available 'on the spot', 'cash when you need it' or 'cash within the hour'.

Payday lenders, unlike banks, building societies or credit unions, do not put customers through proper credit checks. Often all you need to get the loan is proof of residence and an income.

Concerns with payday lending

· Small payday loans can quickly blow out to big bucks
· The interest fees charged are extremely high when compared to other loans. There is currently no limit on interest rates. The annual percentage of interest rates for payday loans can start at 250% and go higher than 1300%. Make sure you understand how much interest you will be paying.
· Some payday lenders require security that is often worth more than the amount borrowed, for example, a bill of sale over a car.

Short-term credit provided for a total of no more than 62 days is subject to the Consumer Credit Code if one or both of the following conditions apply:

1. The total fees and charges payable are more than 5% of the amount of credit; and/or
2. The interest rate charged is more than 24% per annum.
As many payday lenders charge more than 5% in fees and/or 24% in interest per annum they must comply with the Code.
Consumer protection
The Code is intended to control all personal lending in Australia, including home loans, personal loans, credit cards and in-store finance.

Payday lenders must:
· Let you know all the terms of the loan before you sign any contract. Fees, charges payable, the interest rate, repayments, loan terms and whether security is required must be disclosed;
· Provide loan contracts in writing
· Provide you with a copy of the loan contract
· Make proper records of the repayments made
· Make sure the borrower can repay the loan without substantial hardship

Penalties for payday lenders who break the law include:

· Fines of up to $10,000 for each breach of the law
· Losing the right to make you repay a loan
· Losing the right to enforce against some form of security you provided
· Having to pay back some or all of the interest charged
· Declaration the lender has broken the law by not complying with the Code; and/or
· Negative publicity

QUICK TIPS

Payday lenders lure customers with the promise of quick, easy and convenient cash, but often there are hidden traps

Payday loans have VERY high interest rates - up to 1300% per year

Make sure you understand the contract

Don't be intimidated by payday lenders

More information about payday lenders is available in the Office of Fair Trading's "Good Credit Guide"

Some payday lenders have harassed and intimidated borrowers. If you have any concerns, contact the ICAN Office at: 1300 369 878.