Cash Converters refunding $10 million to payday loan borrowers
Loans were deemed "unsuitable" under credit legislation.
Australian short-term lender Cash Converters will refund more than $10 million after the company was found to have issued small amount loans contracts to online customers before verifying their income and expenses, according to the Australian Securities & Investments Commission (ASIC).
Following an ASIC investigation, Cash Converters agreed to pay a $1.35 million penalty for failing to make reasonable inquiries as part of its small amount loans approval process, in accordance with responsible lending obligations.
Rather than assessing actual bank expenses, Cash Converters applied an internally-generated assumed benchmark that had no relevance to the real expenses of the individual consumer.
Cash Converters will refund $10.8 million in fees, through an independent consumer remediation program, to customers who entered into loans deemed unsuitable under credit legislation.
The payday lender will also be required to independently review its current business operations and compliance with the consumer credit regime.
Those customers who had two or more small amount loans in the 90 days prior to taking out another small amount loan through Cash Converters' website between 1 July 2013 and 1 June 2016 can expect to be contacted soon with information regarding their refund.
Customers who entered into a loan contract with Cash Converters, either in-store or online, are encouraged to contact the Credit and Investments Ombudsman.
Last week, ASIC banned direct debit fees charged on payday loans. The new rules, which apply to any payday loan provided from 1 February 2017, came about after an independent review of lending laws.
ASIC's crackdown on Cash Converters is the latest in a slew of industry-wide banking reimbursements and reparations. National Australia Bank, Commonwealth Bank of Australia, Westpac, ING Direct and ANZ have all been penalised for legislative breaches.
Before you take out a loan, understand how they work. Check out our FAQ guide on payday loans.
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