Consumer advocates appear to have scored a big victory, with Westpac confirming that it plans to stop funding the activities of payday lenders such as Cash Converters and Money3.
Westpac was the only major Australian bank to provide finance to the controversial industry, which has been spotlighted by financial regulators for gouging vulnerable borrowers and breaches of responsible lending laws.
The bank, which is viewed by international governance experts as the most socially responsible of Australia’s four major banks, has attracted heavy criticism for its support of payday lending.
Westpac’s decision to reduce its exposure to the sector was announced by Money3 in a filing to the Australian Securities Exchange on Tuesday.
“Money3 Corporation Limited received notice from Westpac of their intent to cease their banking relationship with certain small amount consumer credit providers, including Money3,” the payday lender said in a statement.
“Money3 expect to announce a facility in due course that will ensure business growth is not limited by access to funding.”
A bank spokeswoman confirmed the decision.
“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,” the spokeswoman said.
“We are currently working with our affected customers as they source alternative banking service.”
Westpac’s decision comes as 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.
According to the legal firm, some borrowers were required to pay brokerage fees of more than $200 for organising loans of under $1000.
In June, Cash Converters agreed to settle another class action brought by more than 30,000 customers who claimed they were overcharged interest on loans.
That settlement is believed to have returned up to $23 million to customers.