Westpac to stop funding payday lenders

Westpac announced on Tuesday that it has made a “commercial decision” to cut off from payday lenders. The move comes after the bank was in the news earlier this year with a number of media reports linking it to payday lenders that have acted unethically or unlawfully.     

Payday lending refers to a kind of short-term loan where an individual borrows a small amount of money at a very high rate of interest.

“Westpac can confirm today that after careful consideration, we have made the commercial decision to exit customers who provide ‘payday’ lending products and will no longer support new customers where we are aware that they provide ‘payday’ lending products,” said a Westpac spokeswoman.

While the bank will be pulling away from customers who offer payday lending products, the spokeswoman also said the bank was working with its affected customers as they tried to find alternative banking services, reported the SMH.

"We will honour existing contractual obligations as they manage this transition," she said.

Money3 Corp, a short term finance company, made a statement to the Australian Securities Exchange yesterday, saying Westpac had given them notice that it would end their banking relationship.

Money3 acting chief executive Scott Baldwin said it had a debt facility with Westpac that had been drawn down by $10 million, and it had the capacity to repay this loan with existing cash flows. He said it also had a separate $30 million corporate bond facility that would not be affected by Westpac's decision to pull out of the sector.

Westpac is also known to be a lender to Cash Converters, which recently settled a class action claim in New South Wales over excessive fees. According to The New Daily, Westpac’s decision comes as the social justice law firm, Maurice Blackburn, launches another class action against Cash Converters alleging that thousands of Queensland borrowers were forced to pay exorbitant broking fees on payday loans issued by the company. As per the legal firm, some borrowers were required to pay brokerage fees of more than $200 for organising loans of under $1,000.

Mozo’s money experts advise Australians looking for loans to always compare the personal loan market for a competitive deal.