Consumer groups are calling on Parliament to pass changes to payday loans that will prevent vulnerable people from going deep into debt.
Payday lenders offer consumers quick cash, but typically charge very high fees and excessive interest rates.
Government Services Minister Bill Shorten said some lenders of last resort were performing a useful function, but others were simply doing the wrong thing.
He said flat car tires or a broken down washing machine could be enough to plunge struggling households into crisis.
“All of a sudden it doesn’t take much to push an Aussie maybe doing it hard on the margins just over the edge,” Mr Shorten told reporters in Melbourne.
“But that can never excuse the predatory lending practices of payday lenders.”
On Friday, the Consumer Action Law Center and CHOICE appeared before a House committee to demand payday loan reforms.
The bill, which has already been passed by the lower house, includes a 10% cap on how much of a person’s income can be absorbed by repaying a loan.
The previous ceiling was 20% and applied only to people receiving social security benefits.
Deputy Treasurer Stephen Jones said the reforms were long overdue, with the former coalition government pledging to regulate products in 2016.
However, the changes failed to take off.
“We want to strike a balance between protecting vulnerable consumers and providing credit in a safe environment,” Jones told AAP.
“We clean up what we believe to be unsafe or unreasonable practices.”
Tania Clarke of Consumer Action said hundreds of customers had experienced financial hardship from unregulated credit products in the years since the reforms were launched.
“The fees and charges are astronomical,” she said.
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