An ASIC investigation into payday lender Cash Convertors has found that $10.8 million must be refunded to consumers who were wrongfully issued loans and a further $1.35 million will be paid to ASIC in penalty infringements.
The probe by ASIC found that Cash Convertors, through their website, had approved loans for consumers without verifying their expenses in accordance with responsible lending obligations.
It has been revealed that loan applications were being approved on an internally-generated assumed benchmark as opposed to any real information about the expenses of the consumer.
This is the latest in a string of infringements that payday lenders have been charged with including the $1.5 million lender Nimble was forced to pay back earlier this year.
The payday lending industry has effectively been on notice by ASIC since last year but it seems not much has changed. So if you do find yourself in desperate need of some cash, here are some safer alternatives you can turn to.
Alternatives to a payday loan
1. Speak to your utility provider or bank as soon as you think you will have an issue
If you need money fast to pay a looming bill that you don’t have the cash for your first call should be to the bill provider. This includes if you are worried about making a mortgage repayment. Your bank or utility provider will be able to discuss a hardship payment plan with you that can help you avoid defaulting on a payment and protect your overall credit score.
2. Look into a no interest loan
If you are a low income earner who needs to borrow money to pay for essentials such as household goods or medical bills you could qualify for a no interest loan. As the name suggests, these loans will help you out when you’re in a financial bind without leaving you with the extra interest charges that can make the debt so hard to repay. For more information, you can visit the Good Shepherd Microfinance website.
3. Ask for an advance on your Centrelink payment
If you receive Centrelink payments, you may be eligible to apply for an advanced payment to cover emergency costs. To see if you are eligible, contact the Department of Human Services.
What not to do
If you do need money fast the most important thing to do is to avoid taking out a loan you know you can’t afford. Even if the lender approves the loan, but you have your reservations about how you will repay the loan before the interest kicks in, you should walk away.
It is also important to avoid applying for multiple loans from different lenders if you know you have a poor credit rating. Attempting to get a personal loan from a standard lender when the chances of you being approved are slim will only further damage your credit score with each rejected application.
For more information on how payday loans operate, and what to look out for, take a look at the MoneySmart website.