An alarming number of natural disaster victims are turning to high-cost, short-finance — or pay day loans — to avoid going broke, financial counsellors say.

Key points: Financial counsellor receiving distress calls from people who had lost rented household appliances in floodwaters

Financial counsellor receiving distress calls from people who had lost rented household appliances in floodwaters Concern many more flood victims would turn to unaffordable short-term personal loans from payday lenders

Concern many more flood victims would turn to unaffordable short-term personal loans from payday lenders Legal Aid Queensland concerned a lack of financial literacy in regional centres means many disaster victims see no alternative to payday loans

Donald Mosby, who lives in flood-ravaged Mundingburra in Townsville, is among tens of thousands of Queenslanders who are struggling to comprehend what they lost following the recent floods.

"I'm in hardship right now — my car's gone, pretty much everything in my house has mud all over it," Ms Mosby said.

"So yes, finding it pretty hard to get back on my feet at the moment."

After mopping up, financial counsellors said the massive personal financial cost starts to sink in.

'People don't read contracts'

Ray Kent, who works for the Indigenous Consumer Assistance Network (ICAN) — an Indigenous financial counselling service — said he was receiving distress calls from people who had lost rented household appliances in floodwaters.

He said they were worried because there was no insurance to cover their damaged fridge or microwave, and they could not afford to buy any new goods.

"Most people still think that they own the goods at the end of [a lease], or that they own the goods now — [The problem is] people don't read contracts," Mr Kent said.

Mr Mosby leased his washing machine, and despite losing it in the flood, he still needs to pay the fortnightly rental cost.

He also lost his job two weeks before the floods inundated his home, so he does not know where the money was going to come from to pay for any basic essentials.

"I'm getting by as I can I guess — at the moment money is coming from Centrelink and I had time-off-in-lieu money left over, so I'll [use] that up as far as I can," Mr Mosby said.

Mr Mosby said he feared he could be broke in a month.

In the past Mr Mosby turned to payday lenders to avoid going broke and said he was thinking of going back to them now.

"I would if my credit history is good enough I guess — it might be a last resort, I'm guessing," Mr Mosby said.

Mr Mosby said he was finding it pretty hard to get back on his feet after the Townsville flood. ( Supplied: Donald Mosby )

'Basically at the end of his tether'

That kind of desperation worries Mr Kent and he remains concerned many more flood victims like Mr Mosby would turn to unaffordable short-term personal loans.

"If you had one of those consumer leases, and you lost your products, and you're not on a very high income, probably what you're going to do is take a another consumer lease, or you're going to go to a high interest lender — a payday lender, because you're going to need some money," Mr Kent said.

"The [Government] grants that are available are going to help but they're not the only thing, so they're going to compound the issues that we already see.

"I saw one person, for example, that had 47 loans in a row with a payday lender over about a five-year period — he was basically at the end of his tether."

'Prey upon and profit off other people's pain'

Government-funded Good Shepherd Microfinance offers affordable personal loans in times of crisis.

Last week it dealt with a person who came in with over 288 of these 'buy now, pay later' loans, totalling over $5,500, with no credit check, no capacity to repay and as a result, were now on a treadmill of debt.

Good Shepherd was able to help that flood victim reorganise their personal finances.

But Good Shepherd chief executive officer Peter McNamara said he was bracing for many more clients because he claims payday lenders are now actively pursuing Queenslanders affected by natural disasters.

"These sectors, which do target and in some way prey upon and profit off other people's pain — it's real, we see it on the ground," Mr McNamara said.

"We do a lot of mopping up afterwards because of the aftermath of their pain that they [payday lenders] deliver.

"We have thousands of people who come to our services every week and, more and more, the growth of people coming to us in a crisis because of natural disaster — that happens — it's the fact that so many people are coming in trapped in the treadmill of debt because they've been lured in by a payday loan.

"They advertise towards them, they market to them, they make it sound as if it's a necessity and it's there for them.

"We're not saying the services shouldn't be there — we're just saying they [payday lenders] shouldn't be preying on them — they should be heavily regulated."

Call to regulate payday lender industry

Financial counsellors told ABC's RN Breakfast program that 'Money 3' had become the go-to payday lender among cash-strapped natural disaster victims.

The ABC requested an interview with Money 3 but had not received a response before deadline.

A Senate inquiry into credit and financial services targeted at Australians at risk of financial hardship has been examining whether the industry needs to be better regulated and will hand down its report today.

In a submission, Good Shepherd Microfinance told the inquiry how a disability pensioner using a 'lease-to-buy' scheme ended up with four televisions, two stereos and a range of household appliances.

Her repayments took well over half of her weekly pension.

Mr McNamara said he believed the payday lender industry was thriving under the regulatory radar.

"There's a real need for Parliament and ASIC to catch up with the financial technology [or fintech] and force these multi-million-dollar buy-now, pay-later companies to be responsible lenders, because they're unregulated," Mr McNamara said.

While Mr McNamara was confident the inquiry would lead to some change, he feared industry lobbyists had too much influence in the corridors of power.

"I'm incredibly surprised by the level and depth of investment they've done in political lobbying so they aren't regulated," Mr McNamara said.

"You just need to look up who are supporting them — ex-politicians.

"It is a great concern for us that they're getting their voice into Parliament and positioning that they're OK, whereas all we're saying is they should be regulated like other lending programs."

'Potential financial ruin'

Legal Aid Queensland (LAQ) also called for better industry oversight and is concerned a lack of financial literacy in regional centres meant many disaster victims saw no alternative to payday loans.

LAQ senior lawyer Paul Holmes said people had already been traumatised to begin with by the flood, let along facing financial difficulties.

"I think any of us who have lived through a significant natural disaster understand that trauma and then when you add the prospect of — what in reality is potential financial ruin — on top of that, I don't think there is any of us that wouldn't struggle emotionally with that," Mr Holmes said.

"As a result of that, you see very distressed people who are struggling to work out often what is the best of a bad set of options for them."

The damaged kitchen of Mr Mosby's flood-ravaged home in Mundingburra. ( Supplied: Donald Mosby )

Mr Mosby said people suffering through a natural disaster were worrying about the potential for financial ruin and just want some hope.

"Make an easy pathway — have an organisation that can help people like myself that have lost everything," Mr Mosby said.

"Give them a hope to get back on their feet — it's a long road back."

Counsellors predict personal financial problems in drought and flood-affected areas would likely reach crisis point in six months' time once all avenues for compensation claims had been exhausted.