ASIC's investigation, detailed in Report 805 titled 'Falling short: Compliance with the small amount credit contract obligations,' examined lender behaviors following the implementation of the Financial Service Reform Act 2022 (FSR Act). This legislation was designed to enhance consumer safeguards and prevent lenders from circumventing regulatory responsibilities.
The review identified several troubling practices among some small and medium credit providers, including:
- Issuing loans that may not align with the financial needs and capacities of consumers.
- Failing to accurately define and target appropriate markets for their products.
- Potentially structuring business models to evade the additional consumer protections mandated for SACCs.
ASIC Commissioner Alan Kirkland emphasized the vulnerability of consumers who utilize these financial products, stating that such individuals often require heightened protections. He reiterated ASIC's commitment to enforcing compliance and indicated that the commission would consider further actions if serious breaches are detected.
In response to these findings, ASIC has taken several enforcement actions, including initiating civil penalty proceedings against Ausfinancial Pty Ltd, trading as Swoosh Finance, for alleged violations of responsible lending obligations and design and distribution requirements. Additionally, ASIC secured $16 million in penalties against Ferratum Australia Pty Ltd for multiple contraventions of the National Credit Act, including imposing prohibited fees.
ASIC continues to monitor the small credit sector closely and urges lenders to adhere strictly to their regulatory obligations to prevent consumer harm. Consumers are advised to exercise caution when engaging with payday lenders and to seek financial counseling if needed. The National Debt Helpline offers free support and can be reached at 1800 007 007 or through their online chat service.
