ASIC faces uphill battle on payday crackdown
Australia's second largest listed payday lender has agreed to refund more than $100,000 to consumers despite finding it had not violated its responsible lending obligations after the corporate regulator raised concerns it breached consumer credit laws.
The Australian Securities and Investments Commission (ASIC) was concerned about Money3's fixed fee loan (also known as LACC loan), which needed only two repayments despite having a 16-month term.
The first repayment only required a minimum amount, while the second larger repayment was due 15 months later and usually accounted for more than 90 per cent of the total balance.
Money3 agreed to refund the money to consumers despite seeking legal advice, and concluding it had not breached the National Consumer Credit Protection Act or its responsible lending obligations.
Managing director, Rob Bryant, said the company took this approach "for the benefit of these customers rather than debate these issues with ASIC".
ASIC said the product could be violating national responsible lending obligations, and could hurt financially vulnerable consumers as they would struggle to repay the second part of the loan.
It said consumers may have wrongly thought the loan terms fostered flexible repayments when the contract clearly stated consumers would be charged a large fee if they did not adhere to the repayment schedule.
Money3 said it would refund more than $100,000 to around 400 consumers, which would ensure current consumers have not repaid any money above the principal amount lent and a cost recovery fee.
It comes as ASIC previously failed to crack down on two Gold Coast payday lenders accused of charging high interest rates after the Federal Court dismissed the case, ruling the violations fell outside the National Credit Act.
AUTHOR
Malavika Santhebennur
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