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The Victorian Consumer Action Law Centre (CALC) has called for a comprehensive interest rate cap of 48 per cent on high-cost, short-term loans in a report released earlier this week.
“Exorbitant effective interest rates on short-term loans, upwards of 400 per cent, continue to put the pinch on vulnerable Australians despite the introduction of responsible lending laws in 2010,” CALC said.
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The report – which CALC acknowledges is a case study-based “snapshot of consumer experiences” – has, however, already attracted intense criticism from lending industry sources.
“With well over half of pay-day loans being spent on basic day-to-day living expenses, it’s obvious that this is an industry that preys on the most vulnerable,” said CALC co-CEO Catriona Lowe.
CALC said borrowers in Queensland, New South Wales and the ACT already benefit from a comprehensive 48 per cent cap and the federal government should extend this protection to all Australians.
“High-interest loans are still being given to consumers struggling with existing commitments,” Ms Lowe said, “even after the lenders have seen clear proof of ongoing financial stress.”
