Payday loan 'debt trap' a growing problem in Tasmania, community lending company warns

Australian money

Вт 31 мар 2015, 8:12 AM AEDT

Tasmanian community loans company says some people are getting nine or more payday loans in a row.

AAP: Alan Porritt

A community organisation in Tasmania has issued a warning about payday loans and debt merchants, after an investigation revealed the financial hardship they can cause.

The warning follows Monday's episode of Four Corners on ABC TV, which exposed one online lender who is the subject of an investigation by the Australian Security and Investments Commission (ASIC), amid allegations it targets drug addicts, gamblers and people who are illiterate .

No Interest Loans Scheme Tasmania (NLIS) describes itself as a company that provides loans with no interest through Centrelink to people on low incomes who need help to buy household goods or to cover education costs and car repairs.

NLIS coordinator Rick Tipping said the organisation processed 40 applications last week and a trend was emerging.

People get trapped into these cycles of borrowing from payday lenders and often people

can have nine or more cash loans. No Interest Loans Scheme Tasmania coordinator Rick Tripping

"More than 25 of those people who applied to us would also have had at least one payday loan, sometimes two, sometimes three," he said.

He said many payday loans had annualised interest rates of up to 240 per cent.

"We see people driven to take out another high cost loan in order to buy food or other basics," he said.

"People get caught in a debt trap.

"Most Tasmanians who take out payday loans do it because these loans are their only option.

"They can't get credit from mainstream sources."

Mr Tipping said payday lenders should be required to refer some people to financial counsellors.

"People get trapped into these cycles of borrowing from payday lenders and often people can have nine or more cash loans, one after the other, because they get trapped."

He has encouraged people considering a payday loan to search for other options.

Source: mobile.abc.net.au

Category: Payday loans

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