Payday lender Cash Store in administration after ASIC probe
Thursday, September 19, 2013/
A payday loans company hunted by the corporate regulator in the Federal Court has now been placed in administration.
The collapse of the business – one of the industry’s largest – comes as the Australian Securities and Investments Commission has continued to pursue payday loan companies which it accuses of breaching consumer credit guidelines.
The Cash Store was placed into administration on September 16, with Bentleys Corporate Recovery appointed as administrators. Director Kate Barnet was contacted by SmartCompany, but no reply was available prior to publication.
The Cash Store was also contacted, but no reply was available. However, The Courier-Mail has reported chief executive Tom Denovan sent staff an email in which he calls the administration a “shock”.
The company has over 60 stores, and is one of the largest businesses of its kind in Australia.
But this isn’t the company’s first brush with trouble. Just seven days ago ASIC started pursuing the company in the Federal Court, alleging the business broke credit standards by targeting customers who wouldn’t be able to repay any loans.
“ASIC is committed to maintaining the integrity of the credit industry by ensuring that providers of credit operate their businesses in compliance with the credit laws,” commissioner Greg Tanzer said in a statement at the time.
The payday loans industry has come under intense scrutiny over the past few years. While regulation around these sorts of businesses is tight, critics say lenders provide loans to users with interest of up to 240%, and target those who would be less likely to pay back the money.
Payday lenders have also ramped up their marketing activities recently.
The Consumer Action Law Centre, a customer advocacy group funded by Consumer Affairs Victoria and Victoria Legal Aid, last week praised ASIC for taking action against these types of lenders.
“Recent research found that half of borrowers surveyed had taken out more than 10 loans in the last two years, and that three-quarters of this group had taken out more than 20 loans,” chief executive Gerard Brody said in a statement.
“This is a clear sign that the high-cost loans add to borrowers’ financial problems rather than help them.”
The group also praised ASIC for taking action against Cash Store as one of the industry’s larger entities.