Government must protect Christmas shoppers from 'buy now, prey later'
Good Shepherd Microfinance CEO Peter McNamara said the providers don't check if purchasers can afford to 'pay later' and were making millions from late payment fees.
"It's the antithesis of responsible lending, encouraging people to spend money they don't have, then penalising them for it," Mr McNamara said.
"It's just another reason why the Government must act now to protect people from loan sharks and debt vultures. More than a year ago, the Government promised stronger small amount credit regulations – they need to get them into law before the Christmas sales begin."
Speaking ahead of a microfinance forum in Sydney (Wed 31 Oct), Mr McNamara welcomed plans for a Senate inquiry into payday lenders and consumer finance companies.
"Properly regulating the sector will help encourage low income earners to use safe, affordable finance options like the national No Interest Loan Scheme (NILS)," he said.
"Last year in NSW, we provided 8,740 no interest loans worth over $8 million but we've barely scratched the surface.
"More than 630,000 low income households in NSW are eligible for no interest loans. In some regions, that's up to 42 per cent of the population."
The No Interest Loan Scheme is a safe, affordable alternative for people who can least afford payday or pay-later debt.
"With NILS, you can only borrow for essentials and you only pay back what you borrow," Mr McNamara said. "You don't get trapped in a cycle of debt and you don't have to pay exorbitant fees.
"Most NILS loans are used for car registration and repairs, as well as fridges, washing machines and home appliances. They can also be used for furniture and school expenses."