Payday lender Cash Stop Financial Services (Cash Stop) will refund a total of $14,000 to more than 650 consumers following an investigation by the Australian Securities and Investments Commission (ASIC).
ASIC found Cash Stop breached new payday lending laws when it kept part of the loan funds it should have paid directly to consumers by charging a subscription fee for a Membership Rewards Program.
Cash Stop entered into 697 payday loans between July and August 2013, keeping $20 from each consumer’s loan funds to pay for the program, which came up to $14,000.
“Consumers taking out a small amount loan are often relying on the money to pay for an unexpected expense and cannot afford to be short-changed,” ASIC deputy chairman Peter Kell said.
“ASIC will continue to hold payday lenders accountable and ensure financially vulnerable consumers are not paying more for these types of loans than the law allows.”
ASIC has accepted an enforceable undertaking (EU) from Cash Stop.
Under the EU the firm has to refund the membership fees to each affected consumer, send a letter to each consumer explaining why they are receiving a refund and honour the terms of the membership for the full period for which the consumer paid, despite the payment being refunded.
The Consumer Credit Legislation Amendment (Enhancements) Act 2012 was brought in to protect vulnerable consumers from the use of payday loans, including loans for small amounts taken over short time periods.
