The NSW government is facing criticism after it announced plans to ban “no-jab, no-pay” payday lenders, which are charging clients more for payday loans than traditional lenders, with a warning that they will harm business and consumer confidence.
The NSW Government announced in a statement that payday lenders will be required to offer a service that is comparable to the conventional bank service in terms of speed, security and customer service, with the goal of reducing financial stress and increasing the number of people able to access a loan.
However, the statement also said that “no such service would be offered by payday lenders in the form of a fixed-rate credit card or debit card, and the introduction of such a service would not result in any changes in the nature of the loan or the terms of payment.”
The statement came in response to a number of high-profile cases where payday lenders have faced allegations of abuse and fraud, with claims that they are using tactics such as charging high interest rates, not providing customer service and then failing to deliver.
“This is a threat to consumers, and it’s a threat that can be dealt with with fines and penalties,” said Paul Johnson, president of the Consumer Law Centre, which is one of the organisations that is leading the legal action.
Under the bill, lenders would have to offer payday loans for $250 or less and be located in NSW, as well as in the ACT and Victoria.
New South Wales Premier Gladys Berejiklian said the move was necessary to protect consumers and businesses, but critics say the bill has little impact on payday lenders because they already have an obligation to offer credit to customers.
A spokesperson for NSW Premier Gladyn Andrews said the bill was about protecting consumers and protecting businesses.
Ms Andrews said in a press conference on Wednesday that the new laws would protect customers from predatory payday lenders and that they would not affect the ability of payday lenders to offer other credit products, such as a card that is valid for six months or a debit card.
She also said the government would be working with businesses to help them “create a safer and more sustainable business model”.
“The fact is, the business community and consumers are in a tough place right now.
We have a lot of people out there who are struggling, many of them people who are in the same position as we are,” Ms Andrews said.”
We’ve been working hard with businesses, with consumers, to come up with new ways of doing things that will make them safer.”
In March, a Supreme Court ruling that said payday lending could be legalised in NSW led to a major crackdown on the industry.
It followed a landmark ruling by a federal court in April that said the business and personal debt of people under 21 years old was “not comparable to that of the mature adult”.
The ruling found that the debt was a risk for people who had not worked, had not saved enough money or been in debt for a long period of time.
According to the Australian Consumer Law Reform Commission, there are over 1.5 million people in NSW who have been forced to take out a payday loan because of the laws.
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