Harmful financial products pose a significant threat to the wellbeing of Australian consumers. In recent years, Australia has witnessed the emergence and proliferation of non-mainstream, or ‘fringe’ financial products. According to consumer advocates, providers of some of these products generate substantial profits by taking advantage of their customers, charging above-market prices, high interest rates and unconventional, ad hoc fees. There is evidence that such products serve to entrench the disadvantage of consumers who are already marginalised.
Type of grant: Australian Research Council Linkage Grant
Associate Professor Paul Ali (Chief Investigator)
Paul Ali is an Associate Professor at the Melbourne Law School. For further information, please refer to Paul's profile on Our Staff webpage.
Professor Ian Ramsay (Chief Investigator)
Ian Ramsay is the Harold Ford Professor of Commercial Law at the Melbourne Law School, where he is also Director of the Centre for Corporate Law. For further information, please refer to Ian's profile on Our Staff webpage.
Lucinda O'Brien (Research Fellow)
Lucinda O'Brien is a Research Fellow at the Melbourne Law School. For further information, please refer to Lucinda's profile on Our Staff webpage.
Aims and objectives
This research will fill a significant gap in Australian scholars’ and policymakers’ knowledge of harmful financial products, their impact on the lives of Australian consumers and their role in perpetuating financial exclusion. It will combine a comprehensive legal analysis with a rigorous empirical study of these products and their impact.
To achieve these aims, the project will:
- Investigate, document and analyse the impact of harmful financial products, with a focus on demographic groups that experience above-average rates of financial exclusion (such as women and young people) and particularly marginalised and disadvantaged populations (including newly arrived migrants and rural and remote indigenous communities);
- Conduct surveys, interviews and focus groups involving consumers, providers of fringe financial products, consumer solicitors, financial counsellors, social workers, youth workers and other advocates. These surveys, interviews and focus groups will examine the design and marketing of harmful financial products and explore their financial, social and other impacts upon consumers;
- Consider the extent to which these products work in combination to create or perpetuate financial exclusion;
- Analyse the ways in which these products are regulated and the ways in which they adapt to law reform; evaluate the effectiveness of current laws in managing the risks associated with these products; and, if appropriate, develop law reform proposals to address deficiencies in these laws;
- Publish the research findings and any resulting law reform proposals in scholarly journals and freely available online research papers; and
- Promote public awareness of these products and the risks they represent through engagement with the media, a series of public seminars and the production of accessible educational materials.
Status of the project
The project commenced in 2018. In 2018, the research team carried out a detailed literature review and consulted with the partner organisations regarding the project’s scope, methodology and key focus areas.
In 2019, the research team designed a major online survey exploring consumers’ experiences with three financial products: payday loans (including online loans), buy-now-pay-later services (such as Afterpay) and pawn loans. The research team obtained ethics approval for the survey and launched it in late 2019.
In 2020, the research team carried out extensive statistical analysis of the data gathered in the online survey. It also conducted focus groups with consumer solicitors, financial counsellors and other consumer advocates. These focus groups explored the impact of debt collection on consumers. They also investigated point-of-sale credit and its impact on specific groups such as recently arrived migrants and women affected by family violence.
In 2021, the research team published articles on point-of-sale credit and debt collection, drawing on the focus group data. It also published a major study of the funeral insurance industry. So far, in 2022, the research team has published an article evaluating the Australian Securities and Investments Commission’s new Product Intervention Power, focussing on ASIC’s use of the power in relation to short term credit products.
Further publications are currently in development, including several articles drawing on the survey data.
Ian Ramsay, Paul Ali and Lucinda O’Brien, Submission to the Senate Standing Committee on Economics Inquiry Into Credit and Financial Services Targeted at Australians at Risk of Financial Hardship, 9 November 2018
Kavita Datta, Migrants and Their Money: Surviving Financial Exclusion (Policy, 2012)
Howard Karger, Shortchanged: Life and Debt in the Fringe Economy (Berrett-Koehler, 2005)
For more information about the project, please contact Lucinda O’Brien on (03) 8344 7096 or by email.