Westpac cuts off payday lenders

Westpac will stop lending to payday lenders, the bank announced yesterday.

The bank did not give any reason for its decision but it has been embarrassed by a series of media reports this year linking it to payday lenders that have acted unethically or unlawfully.

One source told Banking Day that the view within the bank is that it came out of a recent Four Corners program looking worse than the targets of the expose.

The bank did not say how many customers would be affected.

Money3 Corp, which provides unsecured consumer finance to borrowers with impaired credit histories, made a statement to the Australian Securities Exchange yesterday, saying Westpac had given the company notice that it would end their banking relationship.

Money3 has a facility drawn to A$10 million. The contractual agreement includes a 12-month run-off period from December.

Money 3 said it had the capacity to repay the facility from existing cash flows.

The company said it had additional funding through a $30 million corporate bond facility that was not affected by Westpac's decision.

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 and is the subject of a similar claim in Queensland.

Money3 acting chief executive Scott Baldwin said it was wrong to call the company a payday lender and that the Westpac facility was being used to fund an auto loan program with terms up to five years.

"We are a responsible lender," Baldwin said.