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
Recommended for you
ASIC has accepted a court enforceable undertaking from a Perth-based company auditor who failed to adequately conduct multiple audits on an advice firm that receivers say has $100 million missing.
After a brutal month for adviser numbers, the net loss for June now stands at more than 100 advisers, but the financial year is still on track to end in positive territory.
Two advice platforms have been identified by Adviser Ratings as standouts for efficiency as time-pressured advisers become evermore fickle in their platform selection.
Private wealth manager Escala Partners has increased its alternatives allocations to more than a third in the past three years, describing the asset class as offering “fertile ground” for diversification.
