A couple of months ago now, I started working for the Brotherhood of St Laurence for their Financial Inclusion team. As part of the broader social inclusion agenda there, my role is focused on financial literacy education.
As ‘research’ for one of my workshops on credit and debt, I decided to hit the big four banks to collect their brochures on accounts and loans, and then realized I was hitting the wrong places and headed towards cash converters and cash stop. Already understanding the shocking theory of these places still didn’t prepare me for how fired up I would become over the lending practices by the time I came out.
Whilst standing in line for information, I was listening to the conversation the lady in front of me was having as she applied for one of their payday loans…she was sharing with the assistant how her mother had become unwell, she had to pay bills for her children, there was a very evident desperation about her situation…and cash converters was there to save the day.
As I listened to this poor lady tell her story, I also picked up an info sheet about their loans…
For a 2 week loan, annual interest rate 0% (that’s pretty good hey?) and brace yourself…938% comparison rate. A comparison rate is like the interest rate but includes fees of the loan...If you ever needed a definition of preying on the poor…that is it!
I just wanted to grab this woman and tell her not to get the loan…but then I was stumped…really, what was her alternative?
Pawnshops are as equally bad, my colleague spent a significant amount of time on Friday on the phone for a client, trying to renegotiate the interest from a loan…from a $400 loan, they already owed over $500 of interest on top of that…
If you’ve never taken much notice, I challenge you to drop into your local pawnbroker or cash converters…perhaps look in your local papers through the eyes of someone desperate for a financial break…the sheer amount of payday lending adverts out there might surprise you…it did to me!
So...I’m interested, have you or your clients, community had any experiences with these places?? I would love to hear them…