By JR on Tuesday, October 25, 2011
The demand for easy loans to poor people will always be there and will always require high interest rates to offset the costs and risks. So criminals will move in if such loans are banned or made unviable to legitimate business. And the crims will be MUCH worse to deal with than the present legit guys. Government regulation has already worsened the situation with their restrictions and they think more restrictions are going to make things better?
QUEENSLANDERS are losing their cars and their homes to payday lenders who exploit loopholes despite a State Government crackdown three years ago.
National Legal Aid has told the Federal Government that despite Queensland capping short-term loan costs at 48 per cent, lenders still find ways around the limit, including the use of high brokerage fees.
The Courier-Mail revealed the practice of writing loans in formats that don't attract the cap just after the law changed in 2008, prompting a fair trade investigation.
The Federal Government has been warned loophole schemes are still being used as it is on the cusp of introducing a new national cap of 2 per cent per month on loans under $2000.
"There are some (lenders) who have business models that are far more complex and no doubt there will eventually be litigation," Legal Aid consumer advocate Catherine Uhr said.
In one instance, a 25-year-old man on a disability pension and living with his mother had up to 35 loans with a series of providers using "anti-avoidance" techniques to get around the 48 per cent cap.
Ms Uhr said that in Queensland, many loans were secured over cars and property. "We see loans escalate. And the reason they've come to get legal advice is because they're losing their car or losing their home," she said. "There's nothing stopping you charging up to 48 per cent and taking security over the house in Queensland."
It comes as the industry yesterday tried to ramp up its opposition to the national cap on small loans, arguing the limits would make loans unviable and leave a hole in the lending market.
The Federal Government inquiry into the new legislation heard how most people took the loans out to cover spiralling utility bills, before finding themselves in a disastrous debt crisis.
Payday lenders attempted to defend themselves in the inquiry yesterday, with Money 3 chief Robert Bryant saying: "We don't sell money, we sell self esteem."
Cash Converters, the biggest provider of short-term loans in the country, told the inquiry the Bill would force them out of business.
Its submission to the inquiry, kept secret until yesterday, admitted that the company had turned to brokerage fees in Queensland in order to get around the cap.