Legislation to restrict interest and fees on payday loans and consumer leases needs to be passed to protect the vulnerable, the co-ordinator of No Interest Loans Scheme Tasmania says.
A Senate committee last month released a report into financial products targeting Australians at risk of financial hardship, recommending a review into the "chronic underreporting of malpractice", a code of practice for buy now, pay later schemes and more funding for regulatory bodies.
The inquiry found these financial products - such as rent-to-own and payday loans - posed "oversized risk … specifically to Australians in financial hardship" and regulation was limited.
NILS Tasmania contributed to the inquiry, citing an example of a Centrelink-reliant mother-of-three from Northern Tasmania being signed up to five concurrent rent-to-own deals that would cost 300 per cent above the retail value.
NILS Tasmania co-ordinator Rick Tipping said the industry had seen "exponential growth" in recent years, and draft legislation was ready for greater consumer protections but there was little will from the government.
"People who are living on very low incomes don't really spend a lot of time thinking about the consequences of taking on these risky debt products because they don't have any choices about taking them on," he said.
"They're managing with great difficulty on very low incomes … you do what you have to do to survive."
Mr Tipping said it was vital that consumers had protections to avoid being signed up to multiple deals at once, with no possibility they could make the repayments.
"If you look at the contracts, they have very fine print - pages and pages of fine print. If you're living in the moment, you're just going to sign on the bottom line," he said.
The report also recommended greater funding for organisations such as NILS and Step-Up, and their promotion in Centrelink service centres.
The inquiry - dominated by Labor and the Greens - found that the worst examples of predatory behaviour targeting the vulnerable came from marginal credit products such as payday loans and consumer leases.
In one example, a Centrelink recipient who purchased a clothes dryer through a consumer lease was paying an 884 per cent equivalent interest rate.
The Consumer Action Law Centre found "the vast majority of payday lenders charge the maximum amount permitted by legislation" in regards to interest.
In a dissenting report, Coalition senators argued their "open banking" regime would improve consumer outcomes by giving them greater access to their own data.