Cash Converters will refund Australian consumers more than $10m in unfair payday lending after a major investigation by Australia’s corporate watchdog found it failed to meet responsible lending obligations.
The lending group has also been forced to pay fines totalling $1.35m as part of 30 infringement notices issued by the Australian Securities and Investments Commission for failing to assess small loans as unsuitable.
The loans entered into were unsuitable because consumers had already entered into two or more loans at the time they were signed up by Cash Converters. Asic believed the loan terms amounted to breaches of the National Credit Act.
Asic announced on Wednesday it had accepted undertakings from Cash Converters and that it had agreed to pay back millions to consumers for the breaches of credit laws.
The basis for the undertaking was that Asic’s investigation found that 118,000 small amount credit loans had been issued to people who were deemed unsuitable.
“Asic is seeking to protect financially vulnerable consumers, many of whom are recipients of welfare payments, from falling victim to unsuitable payday loans,” said Asic’s deputy chairman, Peter Kell.
“Payday lending is a high priority area for Asic and we will continue to pursue lenders who do not follow their responsible lending obligations.”
An independent expert will be appointed as part of the undertaking by Cash Converters to oversee the consumer refund and remediation program. The expert will also review Cash Converters’ business operations and compliance with credit laws.
Pervasive problems have been identified in small-amount credit contracts as well as consumer loans by consumer groups.
Consumer groups have warned that they often target vulnerable people who cannot afford the repayment terms and there have been consistent calls to tighten their regulation.
The former assistant treasurer Josh Frydenberg commissioned a Treasury review that focused on consumer leases and payday loans.
The review recommended substantial changes, but the government has not yet addressed them.
Complaints about loan contracts can be lodged with the Credit and Investments Ombudsman.
