They're the attractive loan to rid you of an urgent expense, but an increasing number of Canberrans are being left with revolving debts after signing up for payday loans.
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The trend has led a financial counsellor to call for a database of payday borrowers and a cap on the number of short-term loans available to vulnerable credit users.
Care Financial Counselling Service director Carmel Franklin said about 15-20 per cent of clients who came for financial counselling had at least one payday loan, as did more than 20 per cent of those who came for the no-interest loans the service provides.
"In the last two years it has significantly increased, those rates are nearly double what we had," she said.
"A lot of our very low-income, vulnerable consumers are being targeted and we see as a result they're unable to meet their ongoing debts and are becoming reliant on the payday industry."
Laws allowed lenders to charge a maximum 20 per cent upfront fee for the short-term loans, usually varying between a few hundred to $2000, and a 4 per cent per month interest rate, she said.
But the service saw clients who ended up paying an annualised interest rate of up to 200 per cent after defaults and extensions.
Rebecca* has lost count of the number of payday loans – worth between $200 and $600 – she has taken out in the last five years for everyday expenses like rent and power bills. Earlier this year, despite being in a full-time job, she had four outstanding loans at once.
"You start to feel trapped," she said.
"Part of me realises taking another loan isn't helpful, but I want to pay it off and if I don't have this loan I don't get to eat, or can't get public transport."
While Care had helped her consolidate her debts, she welcomed the call for a database and a limit on simultaneous loans.
Ms Franklin said payday loans were taken out because people could not access mainstream credit and were generally unaware of options such as Care's no-interest loans and utility hardship policies.
While almost all of the no-interest loan borrowers were on Centrelink payments, there had been a recent increase in clients who had had reasonable incomes and lost their jobs, or who still earned a reasonable wage but could not meet an unexpected expense, she said.
People on low incomes experiencing financial hardship and having difficulties paying their loans can contact Care or the Consumer Law Centre on 1800 007 007.