Loan sharks !

Providing loans to desperate people at excessive rates of interest has been with us since the dawn of time.   Initially, these people were called " Pawnbrokers " - and they advanced a miniscule amount of the value of the goods pawned on the understanding that the loan be repaid with interest in a nominated amount of time - or the goods were confiscated.

In this twenty-first century the trade took on a respectable veneer and the glitzy store image moved to main street.   The money offered was no longer a " loan ", but an offer to buy outright the offered goods - at a mere fraction of their true value.    These were then reoffered to the public - at a huge profit to the merchant.

These stores also offered what came to be termed " Until pay-day loans ".
Small amounts of cash money for desperate people trying to bridge the gap until the next welfare payment or paycheck to buy food or obtain desperately needed medicine.   The interest charged was astronomical - and the government capped these loans with a maximum interest rate of 48%.

Evidence is now emerging that the loan sharks are getting around this restriction and some loans are attracting interest at a rate of 633%.   It is a clever dodge.    The borrower is forced to sign various separate agreements that impose penalties for late payments - and sometimes even for early payments - that inflate the real cost of the loan well above the legal limit.

Another clever impost occurs when a borrower falls short on full repayment within the agreed time frame.   The lender suggests that this balance be " rolled over " into a new loan - and the victim is now committed to paying interest on that already highly inflated interest - which is far higher than the original amount borrowed.   It is a never ending circle, from which there is no escape.

The government has promised to crack down hard on this manipulation of lending laws, but unfortunately the truly desperate have no other avenue to borrow money.    Their circumstances make them unattractive to the banks and most have a past credit record that would not stand up to scrutiny.

At least the civil courts may have a chance of imposing redress.   A class action has commenced seeking to recover $40 million extorted from 50,000 New South Wales citizens by way of excess interest rates.

If successful, it will send the loan sharks back to the drawing boards !