MAY sound like a good solution to low funds at the time, but it only compounds the problem and now a consumer action group wants the process banned.
STOP whining. Shut up and have a face full of money. This is the direct message of the announcement of a payday lender, which has been called “cheeky” and “irresponsible”.
Consumer advocates have called for tighter advertising restrictions on payday loans following a new wave of ads targeting young people and those in financial difficulty.
Ads for two payday lenders, MoneyPlus and MoneyMe, were recently shown on Network Ten and its multi-channel youth channels, Eleven and ONE, on shows such as The simpsons, Futurama and Bob’s burgers.
In the MoneyPlus ad, a woman stands in her kitchen complaining about bills, before she is literally punched in the face with a wad of cash and told to “slap her”.
“Can you believe it? The fridge needs to be replaced, my car needs to be renovated, soon it will be braces for Sarah,” the woman said. “I don’t know how I’m going to continue with all of them. these bills.”
As a wad of notes flies in her face, the voiceover says, “Slap out of it!” If you are in the least, turn to MoneyPlus. Lend you the money you need, from $ 100 to $ 6,000. Visit one of our 10 stores for quick cash.
The MoneyMe ad features a young woman encouraging viewers to take out $ 1,000 cash loans through a mobile app. “You don’t have to wait for payday,” she says.
“Borrow up to $ 1,000 and get your money fast at MoneyMe.com.au. Apply on your mobile with a simple online application. It is so easy. No more waiting face – it’s your adventure face, your renovation face, your spa face, your diving face.
Payday loans, or small loans, cost less than $ 2,000, typically several hundred dollars, and charge very high interest rates, sometimes equal to 300% when calculated on an annualized rate. For example, borrowing $ 2,000 over a 30-day loan period will cost you up to $ 480 in fees.
Consumer Action Law Center CEO Gerard Brody called the ads “terrible.” “It is irresponsible to market high cost credit as a solution to the inability to pay your bills – it only postpones the problem of having insufficient money and makes the problem worse,” he said. . “It can also trigger a continued dependence on payday loans, creating a spiral of debt.”
The Center calls for stronger warnings on television or in any other advertising regarding payday loans. “Payday loans are dangerous, and like other products that harm us like gambling or alcohol, they should come with strong warnings,” he said.
Mr Brody added that a number of payday lenders market repeat loans by texting customers before a loan is paid off and offering them a new one.
“We believe this practice should be banned – like the ban on unsolicited credit card limit increase offers, payday lenders should be banned from marketing repeat loans, especially because it is the policy. government to limit the use of these loans, “he said.
Earlier this year, online payday lender Nimble withdrew one of its ads that encouraged viewers to take out cash loans to pay utility bills following complaints from consumer advocates.
Utility companies are required by law to offer repayment programs for financial hardship, and many community-based microfinance companies offer zero-interest loans for basic necessities such as refrigerators.
The MoneyPlus site, which promises quick cash for “immediate needs” within 30 minutes, lists “bills – electricity, gas or speeding, parking fines” among them.
This directly contradicts the borrowing warning at the bottom of the site, which is required under the National Consumer Credit Protection Act. “Talk to your electricity, gas, phone or water supplier to see if you can work out a payment plan,” he says.
Adam Mooney, managing director of Good Shepherd Microfinance, said the trend to target young people, especially through mobile apps, was concerning. “It’s something that we see a lot, it’s absolutely a growing problem,” he said.
“The type of advertising we see is getting smarter and smarter, and the MoneyPlus advertising is very cheeky – literally in your face, money stealing. They say, ‘Come to us, it’s easy. Go now, pay later, and you’ll be fine.
Mr Mooney said there was an obvious supply and demand problem with many banks now unwilling to lend small amounts due to fears of irresponsible lending penalties on the part of ASIC.
“The unintended consequence of the Responsible Lending Code has been excessive caution on the part of banks, which are moving further away from low-income customers,” he said.
“Add to that the general underemployment and more people in the casual workforce who don’t meet bank credit requirements, and we’re seeing a lot of opportunists coming into the market. Payday lenders see a golden opportunity.
Modeling done by Good Shepherd last year suggested that if interest-free loans could be extended to 50% of low-value loans from their current 6%, the potential increase in GDP would be $ 20 billion, in addition to the $ 2.6 billion in savings from reduced spending on social assistance, health, crime and other areas.
Four in five borrowers who have used Good Shepherd’s zero-interest loans have achieved “economic mobility,” Mr. Mooney said, moving from hardship and dependence on welfare to a position of stability and ultimately to a position of stability. increased income.
Phil Johns, CEO of the National Credit Providers Association, speaking on behalf of the lenders, said if there was something wrong with the announcements, ASIC would have taken action already. He argued that many financial hardship programs offered by utility companies were inadequate, which is why many people turned to lenders.
“Small and medium-sized credit contracts are the most regulated credit product in the country,” he said. “It takes more legal work to take out a loan under $ 2,000 than a bank does for a loan of $ 50,000, these are the requirements these days. “
Mr Johns said that while the government can regulate supply, it cannot regulate demand. “If that’s why customers are walking through the door to apply for credit, it’s not the lender’s fault – it’s a social problem that hasn’t been solved.
He added that contrary to popular belief that taking out multiple back-to-back loans was a bad outcome for the consumer, it was actually “the best outcome.” “It is much cheaper for the consumer to have 12 loans of $ 100 during the year than a single loan of $ 1,200,” he said.
“Those who say it’s bad for the consumer are just bad at math. Most consumer advocates and many politicians grossly underestimate the intelligence of consumers. “
According to advertising market research firm Ebiquity, Nimble remains the top-spending advertiser, accounting for 77 percent of the total, followed by MoneyMe (7.4 percent), Rapid Finance (7.29 percent), Ferratum Australia (2.4 percent) and Cash Train (1.79 percent).
A spokesperson for Network Ten said, “Complaints about the content of an advertisement should be directed to the Office of Advertising Standards.”