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Predatory lending pervasive on social media
Vulnerable Australians who might be looking for a small loan to tide them over until their next pay packet are now being targeted by payday lenders through digital platforms, it’s been revealed.
Predatory lending pervasive on social media
Vulnerable Australians who might be looking for a small loan to tide them over until their next pay packet are now being targeted by payday lenders through digital platforms, it’s been revealed.
According to Monash University, online payday lenders are targeting readers through blogs with advice that suggests they should get payday loans.
Despite regulators, including ASIC, warning against such practices, payday lending continues unabated and without any real penalties for lenders, the researchers have found.
Monash University researcher Dr Vivien Chen said that “on Facebook, for example, payday lenders have many followers and fun social media profiles”.
While their posts include finance tips and cute pictures and engage in socially responsible activities, such as blood donations or environmental responsibility, among these posts they are also promoting their loans.
The researchers have highlighted that Facebook and other forms of social media are subject to very little regulation, despite social media being an environment where people are often most vulnerable.
“It is likely that some consumers are more emotionally susceptible to payday lenders’ advertising when they are viewing their friends’ social media posts, which might include images of recent travel, family gatherings or personal achievements,” Dr Chen said.
Avoiding compliance
Under Australian law, payday lenders are required to post risk warnings on their website; however, Monash University has discovered these warnings are placed in inconspicuous parts of the website, or the impact of the warnings is otherwise reduced through layout and image use.
“Warning hyperlinks are obscure, typically located in the midst of other links to miscellaneous information at the bottom of the homepage,” Dr Chen warned.
More effective financial education
In order to solve the risks associated with payday loans, Monash’s researchers are advocating for more effective communication of the issues associated with payday lending, especially to young adults.
“Millennials are often thought to be visual and experiential learners. The use of videos to explain the risks visually – how debt spirals happen, the consequences such as difficulty borrowing money to buy a house if they have a poor credit rating, and hearing borrowers recount their experiences – may be more effective than the written warnings that are currently required,” she outlined.
Statistics from the Australian Financial Security Authority, Australia’s insolvency regulator, indicate that the highest users of debt agreements (a form of personal insolvency) are people between the ages of 18 and 29 years.
“Excessive use of credit is the most common cause cited for their insolvency. Other research also indicates that young Australians lack financial knowledge, suggesting a need for more financial education,” Dr Chen said.
nestegg has previously reported how one in five Australians consider buying something on social media every time they scroll through a social feed.
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