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Osboldstone, Glenn --- "Consumer Credit Pay day lenders targeted by protest" [2001] AltLawJl 34; (2001) 26(2) Alternative Law Journal 96

Consumer Law: Pay day lenders targeted by protest

GLENN OSBOLDSTONE[*] updates readers on attempts to curtail the spread of this worrying fringe lending scheme.

Pay day lending (described in this journal in the December 2000 edition, DownUnderAllOver column) continues to proliferate around the country with new shopfronts opening up in all States (save Tasmania where the Payday Lenders Moratorium Act was passed this month). Financial counsellors and others working on the ground are starting to hear the horror stories about people struggling under loans that have been rolled over a number of times and are at the point where the fees and charges to be repaid exceed the principal. Some people are being forced to forego paying rent and buying food, clothes and other necessities as the pay day lenders enjoy first dibs at their bank accounts through direct debits.

Several consumer organisations in Victoria and New South Wales coordinated a day of protest on Tuesday, 3 April 2001. The Sydney protest was held at Bankstown in front of an Australian Money Exchange store, while the Victorian protest occurred in Smith Street, Collingwood, outside a recently established ChequExchange store (ironically enough right next door to a closed bank branch). Estimates varied — as they always do — but between 30 and 50 protesters turned up to each protest. The majority of the participants were financial counsellors, many of whom have case studies concerning the misery caused by these fringe lenders and their exorbitant interest rates masquerading as fees and charges. Both protests featured highly talented and handsome (particularly in the case of the Melbourne protest) individuals in shark suits, and placards featuring such slogans as ‘1300% pa interest — No Way’, ‘Pay Day Lenders Exploit the Poor’ and ‘Only Alan Bond Loves Pay Day Lending’ — a reference to the fact Alan Bond has been involved in bringing the practice to the UK. Media coverage was excellent, with the protests making all or most of the television news services, plus print and radio.

Immediately after the protests, John Watkins, the New South Wales Minister for Fair Trading, gave a press conference condemning pay day lenders as ‘bottom feeders’ and vowed to introduce legislation in Parliament within a few weeks that would see them eradicated. True to his word, he introduced the Consumer Credit (NSW) Amendment (Pay Day Lenders) Bill 2001, however, it may not be passed into law before the Queensland amendments. Even Joe Hockey, the Federal Minister for Financial Services, issued a press release slamming pay day lenders as ‘insidious’ and ‘part of the twilight zone of Australian finance’.

There is still no word on when the Consumer Credit (Queensland) Amendment Bill 2001 will be passed, however, it is likely the Bill will not come into force before at least the middle of the year if not longer. This Bill will amend the Consumer Credit Code (as it applies Australia-wide) to bring pay day lenders within the Code by closing the loophole currently allowing them to operate entirely free from regulation. Even so, consumer advocates around the country argue the proposed amendments in that Bill are insufficient to reign in the excesses of pay day lenders. The reason is that the Bill does not include the introduction in all the other States of the 48% cap on interest rates (currently in place in Victoria, NSW and the ACT) and it does not define interest for the purposes of the cap as including all relevant fees and charges, thus ensuring the actual cost of credit provided by pay day lenders does not exceed that cap. As currently drafted, pay day lenders may be able to continue to charge consumers outrageous amounts. The fight goes on.

[*] Glenn Osboldstone is a Melbourne lawyer.

© 2001 Glenn Osboldstone

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