Young Australians are being warned not to fall in love with payday lenders on social media this Christmas.
A new study from Monash University released Friday found that 86% of payday lenders use social media to target young people.
“Payday lenders have lots of followers and fun social media profiles,” said Vivien Chen of Monash Business School.
“Their posts include financial advice, cute pictures, and they engage in socially responsible activities. Yet among these posts, lenders promote their loans.”
The report says young people in particular are emotionally sensitive to payday lender advertising as they scroll through carefully curated photos of celebrities and friends wearing the latest fashions, eating at top restaurants and visiting exotic destinations.
“At times like this, the offer of a payday loan to finance a vacation can seem very appealing, especially when the lender seems helpful, friendly and responsible,” Dr. Chen said.
Existing laws do not require risk warnings on social media sites, she added.
Payday loans, or small credit contracts, are short-term, high-interest loans for amounts up to $ 2,000.
Lenders can charge annual interest rates of up to 400% and are often used by people in financial difficulty, trapping them in a cycle of debt.
Despite the dangers associated with payday loans, more than 4.5 million loans have been taken out in the past three and a half years, for a total of approximately $ 3.1 billion.
The data, released by the Stop The Debt Trap alliance last month, found that about 15% of borrowers fall into a debt spiral that can have serious consequences, including bankruptcy.