Australians, especially those who use social media, are encouraged to be wary of payday lenders hiding on digital platforms, according to a new study.
Social media payday lenders often market ‘quick and convenient’ cash, but there are risks and consequences, said study author Vivien Chen of the Department of Business Law and Taxation from Monash Business School.
“Online advertising mixes ‘selling’ with advice on good budgeting, giving consumers a confusing message that payday loans are part of good financial management,” she said.
Chen said there is a need to enforce regulations to oversee these practices and address the trend’s potential challenges.
“The image of payday lenders as ‘trusted friends when you are in need’ contradicts the findings of the recent Senate investigation into predatory behavior towards vulnerable consumers. The findings of this study resonate with consumers. “Chen said.
Citing the final report of the survey, she said consumers are being steered towards high cost payday loans instead of more appropriate alternatives like financial counseling or low interest loan programs.
While payday lenders are required to provide risk warnings on their websites, Chen said these warnings are often “obscure.”
“Warning hyperlinks are obscure, usually located in the middle of other links to various information at the bottom of the home page. When people scroll down to the bottom of the home page, they are presented with a lot of advertising. more eye-catching and visually appealing before the hyperlink warning becomes visible, ”she said.
Chen recommended communicating the risks associated with payday loans to young adults, who are more susceptible to financial stress.
“Millennials are often seen as visual and experiential learners. Using videos to explain risk visually – how debt spirals occur, consequences such as difficulty in borrowing money to buy a home s ‘They have bad credit, and hearing borrowers tell their stories – may be more effective than the written warnings that are currently required, ”she said.
Consumer groups are once again pushing the coalition government to speed up the development of new laws that will prevent predatory payday lenders from taking advantage of vulnerable Australians.
The Stop the Debt Trap Alliance, made up of several consumer groups, is pushing for the introduction of consumer protection laws that the government has promised to prioritize in 2017.
The delay in implementing these laws is causing more people to fall into the debt trap, with predatory lenders taking advantage of short-term, high-interest loans, said Gerard Brody, managing director of the Consumer Action Law Center.
“This is an important problem that the government has known for a long time and which affects so many people in the community and often people in very vulnerable circumstances,” he told The Guardian.
Earlier this year, a report by the Financial Ombudsman Service (FOS) criticized the behavior of some payday lenders, calling it “unacceptable”. The report says there has been a 130% increase in litigation against payday lenders.