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Payday lenders are using Facebook to target the financially vulnerable

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Digital platforms are quickly becoming the honeytrap of choice for payday lenders, providing an unregulated space where their products can be touted under the guise of lifestyle advice.

Payday loans - now a $1.85b industry - provide consumers with quick, easy access to cash. Less obvious, however, are the costs and risks associated with them.

Research by Dr Vivien Chen, a lecturer in business law and tax at Monash University, found that payday lenders are increasingly using digital platforms, such as blogs and social media, to prey on those with low financial literacy.

"Digital platforms make payday loans very accessible, almost too accessible - but often, borrowers do not fully understand the costs, risks and consequences of these loans," says Chen.

payday loans facebook targeting

"Online advertising is blending the 'sell' with advice on good budgeting, giving consumers a confusing message, that payday loans form part of good financial management.

"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."

These concerns are echoed by Alix Pearce, director of policy and campaigns at the Consumer Action Law Centre.

"Payday lenders are using aggressive marketing techniques to drive vulnerable Australians into a debt trap, encouraging you to take out more and more credit, rather than seeking free financial counselling or accessing No Interest Loan Schemes to help you out of debt."

The regulatory landscape is dangerously ill-equipped to deal with this kind of predatory behaviour.

A Senate inquiry into credit and financial services found that aggressive marketing has steered vulnerable consumers to payday loans in place of more appropriate alternatives such as financial counselling. But more government action is needed.

"We need the government to step up to protect vulnerable Australians from these harmful products, by introducing legislation into parliament," says Pearce.

"It's been over 1000 days since the Government has accepted the findings of its own inquiry into payday loans and consumer leases, how many more reports on consumer harm need to be published before we see action?"

The Consumer Action Law Centre has set up an online petition to pressure the Morrison government to hold payday lenders to the same standards as other credit products. You can find out more at consumeraction.org.au/stopthedebttrap.

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David Thornton is a journalist at Money magazine. He previously worked at Your Money, covering market news as producer of Trading Day Live. Before that, he covered business and finance news at The Constant Investor. David holds a Masters of International Relations from the University of Melbourne.
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