Payday lenders and rental companies should face tougher regulations and better consider the needs of struggling families, an inquiry has found.
A Senate economics committee inquiry, which reported on Friday, was told in one case a person on the dole paid the equivalent of an 884 per cent interest rate on a rented clothes dryer.
As well, payday loans were being offered at rates of between 112 and 407 per cent.
‘Often these products appear not only to have been targeted at Australians in financial hardship – they seem to have been designed to take advantage of them,’ the report found.
The report recommended new laws to protect consumers, extra funding for regulators to police the small and medium credit contract sector and a mandatory obligation to act in the best interests of clients.
As well, tax and other incentives should be considered to boost the number of small credit providers offering low-interest products.
Consumer Action Law Centre said implementing the report’s recommendations should be a priority for the government.
CEO Gerard Brody said ‘these businesses, which escaped the scrutiny of the Banking Royal Commission, are adding to the unmanageable debt problems of many Australians’.
Labor senator Jenny McAllister said in a statement that the report ‘shines a light on the years of exploitation of vulnerable consumers by financial providers’.
On Monday, Labor introduced a private member’s bill addressing consumer credit protections.
The bill included imposing a cap on the total number of payments that can be made on rent-to-buy schemes and requiring payday loans to have equal repayments and payment intervals.