Be careful with payday lenders

The article below shows the importance of understanding money; understanding why we do what we do around money as well as gaining financial literacy.  If more people understood money, the payday lenders would have fewer customers.

You might be interested in this from the ABC website:

Corporate watchdog ASIC is investigating a payday lender accused of lending to drug addicts, gamblers and people who are illiterate as well as changing the terms of loan contracts after they have been signed.

The ABC's Four Corners uncovered disturbing conduct by online lender Good2Go Loans, triggering an investigation by the Australian Securities and Investments Commission.

An insider has revealed numerous cases of irresponsible lending by the company, including lending to a person who was drug affected and another who could barely read or write.

"Someone would come in and you would know that they're visibly affected by drugs," the whistleblower said.

"I'd be told: 'It doesn't matter mate. That loan stacks up. Write the loan'.

"I've had someone with multiple payday loans from other lenders and it's clear they've got a gambling problem — they've got all these online gambling payments on their bank statements. They got the loan."

Four Corners has seen evidence that Good2Go Loans changes the terms of contracts which allow it to get around legislated caps on fees and charges.

After Good2Go Loans customers agree to a two-year repayment contract, the company sends out an SMS message with new terms including an increased repayment which shortens the duration of the loan.

The tactic allows Good2Go to avoid a 20 per cent cap on loan establishment fees set down in federal law.

One Good2Go loan, seen by Four Corners, included a $250 "establishment fee" on a $500 loan.

"The loan contract will say the loan's for 104 weeks, but 99 per cent of the time that doesn't happen," a whistleblower said.

"So once they email back to say 'I accept', we change it on them. We send them an SMS saying their new loan repayment amount.

"They're hoodwinked. They might've signed a contract saying they'll repay, say, $7 or $10 a fortnight, but then it's changed so they're paying back, say, $72 a fortnight.

"They weren't expecting that kind of repayment, so they might miss payments, payments might bounce, then come a whole range of dishonour fees."

Applicants' 'numbers fudged, budgets adjusted'

The law prohibits payday lenders from giving credit to customers who cannot afford it or where the repayments would cause substantial hardship.

But the insider from Good2Go Loans told Four Corners: "Basically the numbers are fudged. The budgets are 'adjusted'."

"The customer might tell you they spend $40 a week on smokes; you put down $10. You put down $5 for clothes so they can buy a T-shirt [then] they won't go clothes-less. We've been told that as long as there's an allowance in there, it's fine.

"The managers will try their darnedest to make the budget fit.

"There would be occasions where you just simply couldn't, but nine times out of 10 they'd make it work."

The insider said the attitude of the company's management towards customers was "total disregard".

"[Management thinks] 'f**k them, bad luck, just do what you've got to do, they're just f*****g Centrelink people, it doesn't matter', you know? 'They're bludgers'," the insider said.

Good2Go Loans did not respond to questions from Four Corners.