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Labor seeks alternatives to payday lenders

Payday loans often come with high interest rates. Image: Getty
Payday loans often come with high interest rates. Image: Getty

Tens of thousands of people considering the use of predatory payday lenders to cover bills will be offered an alternative and safer loan source under a $60 million plan proposed by Labor.

Australians in financial hardship are often unable to access affordable credit in times of crisis, such as when their car breaks down.

They often turn to high-cost fringe credit products, such as payday loans or consumer leases.

A Senate economics committee inquiry, which reported in February, 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.

Opposition Leader Bill Shorten said a Labor government would provide $15 million a year for four years to programs run by Good Shepherd Microfinance so low-income Australians have greater access to affordable loans.

It would open up microfinance to 307,000 new clients delivering up to 76,800 new low-cost loans each year.

“One of the biggest things to come out of the banking royal commission was the way that payday lenders preyed on vulnerable customers – they built their profit model around targeting those who could least afford the loans,” Mr Shorten said.

“I personally heard stories of victims whose lives were ruined by payday loans. I know we need to do more.”

– Paul Osborne, AAP

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