Payday lender charged following ASIC intervention
An Australian payday lender has been hit with a hefty penalty for overcharging its customers.
Fair Go Finance Ltd, which has operated in the payday lending space since 2008, has been fined $34,000 in infringement notices by the Australian Securities and Investments Commission (ASIC) for overcharging customers. The lender is also required to refund approximately 550 customers around $34,500 in excessive interest and fees.
The product which came under investigation and has since been withdrawn by Fair Go Finance, is the Flexi Loan. ASIC noted that the loan was set up in a manner to avoid protections offered to consumers under the National Credit Act.
The Flexi Loan offered three-year terms, but in practice borrowers were required to repay the loan over a much shorter period. They were then charged a default fee if they failed to meet the shorter term. Other issues identified by ASIC include establishment fees being charged at more than twice the 20% maximum and instances of the loan term exceeding the maximum allowed under the National Credit Act.
While ASIC has noted Fair Go Finance's cooperation in the matter, this is not the first time payday lenders have been found to be non-compliant with ASIC's efforts to protect consumers.
In February 2015 The Cash Store, which had 80 stores and wrote short-term loans up to $2,200, was hit with ASIC's largest fine of $18,975. The lender and its Canadian loan funder, unable to pay the fine due to liquidation, were found to have sold "useless" consumer credit insurance to borrowers on Centrelink and on lower incomes.
Another fine to Paid International, now liquidated, was issued due to misleading advertising of "instant decisions" which actually took up to 72 hours.
As ASIC continues tightening consumer protections in the payday lending space, lenders will need to continue to be agile both with their product and their response to the changing legislation. That, or be sent into liquidation with hefty fines.