Tuesday, 05 January, 2009
QUEENSLAND'S biggest payday lender, Cash Converters, will stop offering a controversial loan as many other lenders come under regulatory scrutiny.
The halt to the Cash loans comes as a third of the state's fringe lenders are put under investigation for breaking new laws. The Courier-Mail can reveal the Bligh Government has made Cash Converters abolish a loan designed to circumvent a new cap restricting rates, fees and charges to 48 per cent.
The so-called VIP Advantage Loan effectively offered cash at 420 per cent by getting the customer to hand over a DVD or CD as collateral, purportedly putting the loan under different pawn broking laws. Attorney-General Kerry Shine yesterday said the chain's 45 franchisees offering the product would instead sign conduct deeds outlawing the loan. "This is an enforceable undertaking," Mr. Shine said. "Those franchisees who don't sign deeds will be liable for prosecution."
The move comes five months after The Courier-Mail revealed the loan's existence when the state-imposed cap became effective in August. Cash Converters claimed legal advice had given the product the all-clear. Meanwhile, Mr. Shine has also foreshadowed several likely prosecutions after a subsequent statewide Office of Fair Trading investigation put 54 of 166 lenders audited under investigation. Five are still to be assessed.
One trader caught charging interest rates an average 10 per cent above the 48 per cent cap has been forced to repay $41,546 in overcharged interest. Others have been caught failing to disclose brokerage fees or the total repayments required. Fines of up to $10,000 for directors and $50,000 for companies apply for cap breaches.
Cash Converters general manager Ian Day yesterday said most stores had complied and the remaining few would within a few weeks. "Nothing went wrong," Mr. Day said. "We've always offered a lawful product and will continue to offer a lawful product to our customers. “We did consider it lawful and we still do, but the Government has a different view."
National Financial Services Federation vice-chairman Rob Legat accused the Government of a witchhunt. "We've come across a number of lenders who had no idea this was going on," he said. "The Government has shown a knee-jerk reaction and is now trying to find any way to shut down lenders." Mr. Legat's firm, Fast Access Finance, has been cleared over a curious loan arrangement where customers took out a $250 no-interest loan for a "real diamond" that could be sold elsewhere for $125.
Source: http://www.news.com.au/