The discussion centred on the letterbox dropping of glossy brochures by a local cash store.

The brochures could easily have been mistaken for a gift voucher, offering up to $400 loans in the pre-Christmas period.

Is encouraging more debt around Christmas appropriate?

Payday lenders offer low-value, short-term loans. Typically loans are for $200-$500 and are repayable after two or four weeks.

Payday lenders loan the monies at very high interest rates, one example given as 47.5 per cent.

The money borrowed, plus the interest, must be paid by the borrowers next payday or Centrelink payment.

If the monies are not paid by the due date, consumers can be charged in excess of $75 for a dishonour fee.

Payday lenders often take advantage of vulnerable people who may be unable to access credit from banks, because the amounts being borrowed are too small or people may have a poor credit history.

Payday loans are typically for car repairs, utility bills, food and rent.

Payday loans have been referred to as bridging finance by payday lenders, providing borrowers with a way of overcoming short-term shortfall in their cashflow.

If a $300 payday loan typically required a $405 repayment, then it would not come as a surprise that a borrower may borrow again to meet a further shortfall created by the cost of the loan itself.

Instead of assisting people to overcome financial hardship, they may be trapped into an ongoing cycle of debt.

Is it fair that people are being encouraged to take on loans they can least afford?

The Federal Government is proposing payday lending reforms to the National Consumer Credit Protection Act 2009, so that there is a national cap on costs for loans of $2000 or less which run for less than two years.

The legislation aims to protect vulnerable consumers.

Before the introduction of any uniform laws preventing payday lenders taking advantage of vulnerable people, anyone thinking of taking out a loan should consider other options such as seeing a financial counsellor.

For further information visit www.debttrap.org.au/research.

J udy Curtis,

Mildura.