Pay day lenders find ways around the rules

The pay-day lending industry is preparing, in various ways, for the introduction of the uniform national consumer code that will set a cap of 48 per cent per annum on effective interest rates. Sham pawn broking is on the rise while other lenders are turning to “selling” items of high value to loan applicants who then repay the purchase price after they on-sell the item to an associate of the lender.

Chief executive of Adelaide-based online lender, Lucas Bates, says borrowers can expect to pay $20 to $30 for each $100 outstanding per pay period. Lucas Bates said the danger of the cap is that lending will go underground. “Obviously there are cowboys in this industry, who bully desperate consumers. But this is an ancient industry that won’t just disappear. The danger is that the cowboys go underground and consumers get no protection.”

Source: The Sheet