Cash converters in Australia (Essay Sample)

TITLE: CASH CONVERTERS-EXORBITANT INTEREST RATES Student's Name: University Affiliation: Cash converters is an international company which is based in Australia, and it is involved in pawn broking, and also, it provides small financial loans. This essay is trying to examine the issues of charging exorbitant interest rates to the needy. It also looks into detail the impacts high interest rates have on the needy people. Also, it takes into consideration the ethical issues which are carried out by these cash converters and also the role of professional accountants in this via ethical standards. Concerns have been raised due to the cash converters charging exorbitant interest rates which would make the needy to turn to payday lenders or cash advancers. When low-income earners turn to payday lenders, they find themselves caught up in a debt cycle whereby loans pile up with astronomic interest repayment. When this happen, it will accelerate the rate at which poverty develops in the country. This is because needy and poor people will only be involved in activities which are only aimed at making their ends meet. Most of the payday loans have the effect of depleting the assets of low-income earners. CITATION Bur15 \l 1033 (Malkiel, 2015) Also, concerns about this have erupted because when low-income earners turn to payday lenders, it turns out to be very expensive for them. This is because a 14-day loan may have an average annual percentage of about 400% CITATION Bur15 \l 1033 (Malkiel, 2015). Many borrowers are unable to pay their loans plus the interest fee when they already have enough money to cover all their expenses until their next payday. This means that the cycle of borrowing begins. This cycle lasts long, and it costs more than what they had anticipated. This will affect the needy people way of life. Payday loans encourage chronic borrowing. Payday loans are paid within a very short period, usually one day or about two weeks at which the full borrowed amount has to be repaid at once. Since many borrowers take out a payday loan to cover a chronic shortage of income over expenses, rather than to cover for emergencies, many cash-strapped needy borrowers experience another shortfall after the first loan. That deficit is compounded by the finance charge. Payday money lenders do not determine the capability of an in an individual to pay the amount after a specified period CITATION Bur15 \l 1033 (Malkiel, 2015). This may encourage back-to-back loans since the borrower may not be able to pay the loan after the specified period and therefore he may apply for a rollover at another fee. As discussed, when the needy turn to the payday lenders it will lead to different hardships to their way of life. This vulnerability of the needy is what we are trying to address to avoid exploitation by the lenders and hence the need to regulate our cash converters interest rates. The problem of charging high-interest rates has led to the ethical issues surrounding money converters to be brought to the limelight. These ethical issues include: Transparency. The money converters lacked transparency since they are supposed to include the amount of interest chargeable and any other fee that may be applied. Usurious practices. Usury may define as significantly demanding more money back from customers than what should be fairly charged CITATION Mar15 \l 1033 (Marcus Banks, 2015). Some Money converters charge high-interest rates, credit charges which are ultra-profitable, that go beyond the standard for taking an extra benefit from their customers. Financing of the companies with little or no social responsibilities. Most of the money converters are only involved in the financing of companies at the expense of people to whom it serves. For example, you may find money converters charging high interest rates, meaning it is only concerned about its profit at the expense of the wellbeing of its citizens CITATION Mar15 \l 1033 (Marcus Banks, 2015). Financing on the contrary of the good of the family. Most of the money converters advocate against the family values. These family values are such as those of charging very high-interest rates. Speculative lending practices. Most of the money converters engage in speculative investments and also credit lending practices which are morally unethical and unacceptable and in most cases, not even good to the existing businesses. Ethical issues in reporting income, falsifying documents and engaging in fraud activities. Fraud in the financial documents which can be done in five ways which include: fictitious revenues which are not earned, timing differences, and concealed liabilities and expenses CITATION Mar15 \l 1033 (Marcus Banks, 2015). Based on the charging of high interest rates by the money converters the role of the accountants has also been examined. The accountants must play their key roles to ensure that these high rates of interests are not charged. They ensure this through the following: Accountants are supposed to act as the whistle blower. An accountant should be able to report any accounting violations because it is his ethical duty. Accountants should be able to handle pressure from the management. The burden which is accrued from the companies may lead to increased pressur...