Beware of unregulated “quick fix” salary advances
Australians have been warned about using increasingly popular ‘payday advance’ services because they fear exposing themselves to excessive debt and unregulated products.
Payday advance services give workers access to their payday in advance, with users able to withdraw between $50 and $2,000, which they then repay – with a flat rate or percentage – to the lender on the day. of pay. The services work similarly to payday loans, but with lower fees and shorter repayment times.
Deputy Treasurer Stephen Jones said Labor would seek to regulate buy now, pay for services later and pay industry up front.Credit:Alex Ellinghausen
A number of large payday advance companies have sprung up recently, including Commonwealth Bank’s Beforepay, MyPayNow and AdvancePay, listed on the Australian Securities Exchange. Their number of customers has increased, spurred by the soaring cost of living and rising interest rates.
However, despite their growing popularity, cash-strapped workers have been warned to avoid these services.
A spokesperson for the Australian Securities and Investments Commission’s financial regulator MoneySmart The financial advice division said that while they might seem like a “quick fix”, users should look for other options.
“If you need cash fast, a payday advance service might come in handy,” the spokesperson said. “[However]Using a payday advance service means you’ll have less money on your next payday, and if overused, it can be difficult to keep track of repayments when managing other financial commitments.
“Keep in mind that each time you use the service, you are charged a fee. Although payday advance providers have limits on what they can charge you, your bank may charge a fee if you do not have enough money in your account to cover your refund.
Borrowing money through a payday advance service can also affect your ability to borrow money, such as a home loan, in the future, as lenders often have a low opinion of it. payday advance and buy now, pay later services when assessing a borrower’s spending habits.
Another major ASIC concern is that payday advance services are unregulated, operating under a loophole in credit laws, which allows providers to circumvent the need for credit checks or verification processes. difficulties.