An Illawarra financial counsellor believes measures need to be taken to address the number of people getting themselves into financial strife through payday lending practices.
Labor’s Shadow Minister for Finance Jim Chalmers visited Wollongong on Tuesday for a roundtable with community sector organisations to discuss the impact of rising cost-of-living pressures.
Labor says the cost of living is growing across the Illawarra with increases to housing costs, electricity price rises and cuts to family and household benefits.
Mr Chalmers said vast increases in house prices across the region was leading to growing rental and mortgage stress among local families.
Among those in attendance for the roundtable was Maroun Germanos, a financial counsellor at the Illawarra Legal Centre.
Mr Germanos said many of the issues they were presented with were debts related to payday lending.
He said they were seeing a rise in the number of clients taking up these types of loans, with some doing so for items such as electricity bills, car registration and also to gamble.
Mr Germanos said some clients were getting themselves into financial predicaments with these loans, which could lead to stress, bankruptcy or children to go without food.
“They firstly get the money to pay off like an electricity bill, then the time comes to pay back the loan and they can’t afford to make the payment because they’re already in the red somewhere else,” he said.
“So they go and get another loan to pay the first one. However, lots of lenders are not really adhering to the regulations… And some don’t check people’s credit rating, they don’t even check if you can afford to repay.
“With the rent-to-buy scheme, we’ve seen clients paying two, three and four times what the item is worth.”
He suggested capping the loan repayments to no more than 10 per cent of net income, or alternatives such as the No Interest Loan Scheme.
Whitlam MP Stephen Jones said Labor has introduced its own Private Member’s Bill to reform payday lending and rent-to-buy laws, “which is an identical copy to the draft legislation released by the government”.