Smart50 finalist Paid International has agreed to refund $1.128 million to customers who were charged an excessive fee after taking out loans of up to $5000.
The refunds are part of an enforceable undertaking accepted by the Australian Securities and Investments Commission to 6650 consumers in relation to 20,273 loans.
An ASIC investigation found Paid International unlawfully charged customers in some states a fee of up to $59.50 to pay the loan money into their bank accounts electronically and failed to comply with its general conduct, responsible lending, advertising and disclosure obligations.
The fee was added to the loan amount as an additional amount repayable by consumers, and it significantly exceeded the actual fees that Paid International incurred in arranging an electronic transfer.
Under the terms of the undertaking, Paid International will refund the fees, pay the balance of any money unable to be refunded to consumers to Financial Counselling Australia, and engage an independent compliance consultant to audit the refund process and review Paid International’s policies and procedures.
ASIC’s deputy chairman Peter Kell said consumers taking out a small amount or payday loan can be vulnerable and on low incomes, and cannot afford to pay high fees.
“The law restricts the total amount that lenders can charge for these loans, and ASIC will take action where lenders breach the cap on costs,” he said in statement.
It’s not the first time Paid International has run into trouble with ASIC with the lender copping a fine from the regulator earlier this year for misleading ads.
Tim Dean, chief executive of Paid International, said Paid is committed to absolute compliance with responsible lending laws while providing fast credit solutions.
He said the company has been working closely with ASIC.
“Paid International welcomes the negotiated resolution of the matter through an enforceable undertaking and will move quickly and efficiently to process the refunds to affected customers, most of whom continue to be customers of Paid International,” he said in a statement.
“The company has implemented the necessary and appropriate policies and protocols to ensure it continues to comply with the National Credit Act.”
*Story updated to include a response from Paid International on 16 October 2014