High-cost credit businesses like payday lenders are often easy to spot.
Big, bright signs promise easy credit.
Slogans like "Bad credit? Don't sweat it" entice with fast and easy access to cash.
When the Logan Financial Literacy Action Group (FLAG) wanted to discover the drivers behind people's use of high-cost credit in Logan and what they can do to redirect them to lower cost options, their first step was to do a drive by and look at the physical landscape of Logan.
By mapping the credit providers on an interactive map of the area they found an interesting disparity. High cost credit businesses such as payday lenders, consumer leases and car yards were clustered in lower socio-economic areas, while more affluent suburbs had plenty of banks but no payday lenders.
The purpose of FLAG's collective of community and government agencies is to improve financial capacity and capabilities in Logan.
Kenny Duke, Client Services Manager with Access Community Services and a FLAG member since its inception explains, "FLAG was borne out of the need to improve financial literacy in the area. We were having "water cooler" conversations about high personal debt in Logan so we arranged a community forum to discuss what action we could take. We were determined not to duplicate the work already done in this field, instead we look into the more entrenched and complex issues that can’t be solved by one agency, rather they need a collaborative effort."
The Logan credit map makes it clear that high cost credit providers are deliberately targeting people who think they have no other options or those who are locked out of the traditional credit market due to low incomes. These high cost options are putting a strain on budgets and often become a cyclical event with a new loan taken out as soon as one is paid back, or a second loan being used to pay the balance of the first.
Kenny gives the example of one lady who had a consumer lease for approximately $7,000 worth of household goods. In the third year of her rental agreement she had already paid $33,000 with another year still to go on the contract.
Kenny says, "Most people who use these services are aware they are paying over the odds for the goods, or higher interest rates, but need the goods/cash and don't see any other way out of their situation. We even have stories of people putting these repayments before vital budget items like their rent or electricity."
In addition to creating the credit map, FLAG members have run workshops on budgeting and financial literacy skills, delivered seminars on avoiding credit traps and scams, organised financial literacy expos attended by 500 Logan residents and provided professional development seminars for community workers.
To find out more about setting up a financial literacy action group in your area, or for access to the credit map, email email@example.com
For more information about financial and budgeting tips and resources, including low or no-cost loan providers, visit the Cost of Living section on Community Door.
If you're interested in hearing from other communities that are doing things differently, join QCOSS at the Movement for change conference on 16 and 17 May 2018. Find out more here.