Desperate borrowers lose beds to 'predatory' Payday Loans

Payday lenders claim they provide a safety netfor borrowers in dire need. Critics charge they are predators taking advantage of the vulnerable and financially unstable.

At a time of increasing debt and unemployment levels, where new figures show the number of personal bankruptcies in Australia rose to a near-record high of 7164 in the first quarter of the year, so-called 'predatory loans' are charging rates of more than 40 per cent per annum; and forcing borrowers to pledge household items as loan security.

Borrowers are losing beds, TVs and washing machines after taking out short-term, high-interest 'payday loans' they cannot afford to repay, say consumer advocates.

But John Brady, manager of City Finance says those kinds of repossessions are so few that, 'you’d be able to count them on the fingers of one hand'.

Customers have to prove income, but can still get a loan if they are on Centrelink, he says. Borrowers quickly get into trouble when they make a habit of relying on quick cash loans to cover electricity bills or car registration fees, says NSW Consumer Credit Legal Centre’s Ms Lane.

'I get a steady stream of people who go to fringe lenders, as I call them, and are on Centrelink,' she says. Ms Lane says the problem will get worse as more people lose their jobs.

'We’re starting to see people who are unemployed. It only takes a few months until after you lose your job and you just can’t pay anything. Unemployment definitely leads to immediate financial distress. It gets very serious very quickly,' she says.

The Federal Government has unveiled proposed laws to hit sleazy lenders who provide borrowers with unsuitable loans. A credit licence will be required for the first time for payday loan companies and stiff penalties are going to charged to those who break the new laws.