The number of stressed older Australians taking out ‘payday loans’ to enable them to get through to the next pension payment is six times higher than it was 10 years ago, research reveals.
Payday loans are accessed through ATM-like cash machines with the only details required being personal identification and bank details. The loan requests are processed almost immediately.
The machines schedule “loan repayments to match when you get paid” through wages or by Centrelink and charge a 20 per cent establishment fee and four per cent interest per month.
In 2005, only 1.6 per cent of these loans were accessed by stressed older Australians. By 2015, that number had jumped to 5.3 per cent, according to a report conducted by Digital Finance Analytics and Monash University for the Consumer Action Law Centre (CALC), Good Shepherd and Financial Rights Legal Centre.
The report assessed the number of financially distressed households in 2015 at 31.8 per cent compared with 23.5 per cent in 2005, and said the number of households using payday loans had almost doubled since 2005 to 643,087 in 2015. The average loan amount in 2015 was $2223.
Figures cited by Fairfax Media and obtained under freedom-of-information laws show more than 12,000 companies have been approved for Centrepay access.
The machines are regulated by the Australian Securities and Investments Commission (ASIC) in the same way as other payday lenders.
One company operating the loan machines is CashNgo. Founder George Hajjar told Fairfax Media: “We want to provide access to funds to those who desperately need it. We have never had one complaint. We take our responsible lending obligations very seriously.”
Loans have grown from $476 million to $538 million in the past year, according to CoreData, with stagnant wage growth and rising cost-of-living pressures seen as the main culprits.
Financial Counsellors Association NSW chairman Graham Smith said he was worried disadvantaged communities were being targeted.
“Unfortunately, I think these machines are targeting the most vulnerable in our community –people on benefits who are looking at a way of getting some quick cash that I don’t think they can afford in the long run,” he told ABC Online.
He warned anyone considering a quick loan to proceed with great care.
“It’s an area of our society where people are struggling, and with electricity bills increasing, people have got less and less money, and going to one of these organisations and getting a loan can often be a deep financial trap.”
Consumer Action Law Centre (CALC) chief executive Gerard Brody has cautioned that instant approvals means some people will end up with more debt than they can handle.
“If you find you are having trouble with your bills, don’t be afraid to ask for help from a financial counsellor,” he said. “Money problems can happen to anyone, and financial counsellors are well equipped to give you free and independent advice about options to help get you back on your feet.
“You can speak to a financial counsellor by calling the National Debt Helpline on 1800 007 007 or find independent debt help information on its website.”
In the YourLifeChoices Insights Survey 2018, an overwhelming 83 per cent of the 6694 respondents said the Age Pension and supplements were not enough to live on.
Have you ever used one of these machines? Do you struggle to meet household costs every month?