Pressure Grows for Rate Cap in Queensland

The following is an article from the Courier & Mail, Queensland, Australia - 3/08/2007

Mum's 240% interest scare

KAREN Deakin doesn't want to see another payday lender again. A loan bearing 240 per cent interest rates tends to do that.

Like many who sign up for short-term credit, the Brisbane pensioner did not read the fine print of her contract saying what the true interest rate was.
The lender was too busy telling her about the small weekly repayments.

"It's just terribly wrong," Ms Deakin, 41, of Loganlea, said yesterday.

"There should be something done to stop people like this taking advantage of people who are desperate."

In October 2005, she borrowed $1500 from a Beenleigh lender on Brisbane's southside to help pay a few bills. The contract – completely legal – was for one year with a weekly repayment of $80, amounting to about $4300 by the end of the term.

Had Ms Deakin borrowed the same amount on a standard credit card rate of 15 per cent, she would have paid $80 a week for five months, paying about $100 interest.

When the contract and repayments expired last October, however, the lender kept taking the repayments out of her account every week.

Ms Deakin only noticed this last month when she received a receipt for the extra $3000 she had paid.

Ms Deakin may not have found herself in the predicament she is now in if Queensland's Fair Trading Minister Margaret Keech had kept her promise to protect Queenslanders from exorbitant payday lending interest rates.

In some cases, it had been reported, that rates of more than 1600 per cent were being demanded.

In an admission which has infuriated consumer groups, Mrs Keech yesterday admitted her self-imposed mid-year deadline to cap exorbitant rates had not been met.

The missed deadline comes after nine years of Government inaction and broken promises.

Queensland lenders can still charge consumers whatever they want, despite other states introducing rate caps of about 48 per cent in 2001.

Mrs Keech said the legislation hadn't gone to Cabinet because

finalising the consultation process took longer than her department had anticipated.

"I expect to finalise the Government's response to this issue, including proposed legislation, in 2007," she said.

Consumer groups such as Legal Aid Queensland are furious after falsely believing help was finally on the way.

The group recently settled a court case against a lender charging 1642 per cent annually.

The loan was ostensibly at 9 per cent, but had to be repaid in 48 hours, making the annual rate astronomical.

"We're still waiting," LAQ chief executive Jenny Hardy said.

"In the meantime, our clients are still hurting as they struggle to pay off their debts."

The Courier-Mail revealed last year a list of promises from ministers to review and cap rates dating back to July 1998.

Opposition fair trading spokesman Mark McArdle yesterday called on the Premier to intervene.

"Empty promises from empty vessels," Mr McArdle said.

"If the minister can't even commit herself to a deadline and make it happen, then the Premier has got a real problem and should be doing something."

Mrs Keech indicated she intended to introduce a cap – expected to be similar to 48 per cent – to limit the cost to consumers.

However, such a move would be one lenders such as National Finance Services Federation Queensland president Rob Legat claim will devastate the industry.

Mr Legat said it was wrong to ask a business to fix its income, which would effectively happen under cap legislation.