Payday lending company in court for allegedly targeting low-income borrowers
Thursday, September 12, 2013/
The Australian Securities and Investments Commission has started legal action against a payday lender company for allegedly breaking credit standards – one of several such accusations the regulator has levelled in the past few months.
Credit companies have been hit more severely this year by the corporate watchdog, which has been enforcing new consumer credit laws with newfound severity.
In a statement, ASIC said it has launched legal proceedings against payday lending group Cash Store for allegedly breaching consumer credit laws including responsible lending obligations, along with an accusation of unconscionable conduct.
The Cash Store – which is one of the country’s largest payday lenders – was contacted by SmartCompany this morning, but no reply was received prior to publication.
Media reports earlier this year speculated the regulator would be probing the Cash Store for alleged violations. The company was accused of giving loans that couldn’t be repaid.
Now, ASIC says civil penalties have been filed in the Federal Court regarding those claims – specifically, that the Cash Store and associated entity Assistive Finance Australia provided unaffordable loans to customers who were on low incomes.
“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,” ASIC commissioner Greg Tanzer said in a statement.
The Commission said the maximum penalty for breaching credit laws was $340,000 for each breach.
The regulator has been on a rampage during the past several months regarding consumer credit crackdowns. Earlier this month, ASIC banned all the franchise directors of a Victorian-based rental provider for targeting vulnerable consumers.
Last month, Queensland-based group Fast Access Finance was accused by the regulator of using a scheme involving selling diamonds in order to avoid credit laws. The company itself told SmartCompany the accusation was without basis.
ASIC said in its statement a contract is considered unsuitable if the consumer would be unable to pay without “substantial hardship”.