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Wednesday 15 October 2014

14-272MR ASIC action leads to $1.128 million refund to consumers

PAID International Ltd (PAID) (formerly First Stop Money Ltd) will refund $1,128,142 to customers who were charged an excessive fee after taking out loans of up to $5,000, including small amount loans.

The refunds will be made as part of an enforceable undertaking (EU) accepted by ASIC to 6,650 consumers in relation to 20,273 loans.

The EU was offered to ASIC by PAID, a licensed credit provider which mainly offers small amount loans to consumers, after an ASIC investigation found that between 1 July 2011 and 30 June 2013, PAID:

  • unlawfully charged its customers in New South Wales and the Australian Capital Territory a fee of up to $59.50 to pay the loan money into their bank accounts by electronic funds transfer (EFT) (instead of by cheque), and
  • had failed to comply with its general conduct, responsible lending, advertising and disclosure obligations.

The EFT fee was added to the loan amount as an additional amount repayable by consumers, and it significantly exceeded the actual fees that PAID incurred in arranging an EFT transfer. ASIC was concerned that, as well as breaching the National Consumer Credit Protection Act 2009 (National Credit Act), charging the EFT fee contravened NSW and ACT legislation which imposed a limit on the total fees and charges allowable under consumer credit contracts.

ASIC has accepted an EU which requires PAID to:

  • refund the EFT fee charged to consumers by 31 March 2015
  • pay, by 10 April 2015, the balance of any money unable to be refunded to consumers to Financial Counselling Australia for the purpose of funding financial literacy programs and research in Australia, and
  • engage an independent compliance consultant to audit the refund process and report to ASIC by 30 April 2015.

The independent consultant will also review PAID's policies and procedures to ensure compliance with the credit legislation in relation to its general conduct, responsible lending, advertising and disclosure obligations, and make recommendations about any required changes.

Deputy Chairman Peter Kell said, 'Consumers taking out a small amount or payday loan can be vulnerable and on low incomes, and cannot afford to pay high fees. The law restricts the total amount that lenders can charge for these loans, and ASIC will take action where lenders breach the cap on costs.'

Download the enforceable undertaking



Prior to July 2013, some states and territories had laws capping the cost of credit for consumer loans including small amount loans. Lenders were also bound by responsible lending provisions of the National Credit Act.

Due to government concerns about the use of small amount or payday loans, the Consumer Credit Legislation Amendment (Enhancements) Act 2012 introduced provisions specifically designed to protect vulnerable consumers who access this form of finance. ASIC now regulates a national cap on costs, as well as heightened responsible lending obligations for providers of small amount loans.

Recent action ASIC has taken in relation to other small amount lenders:

  • Payday lender engages in unconscionable conduct and breaches consumer credit laws (refer: 14-220MR).
  • ASIC takes action against payday lending businesses (refer: 14-150MR).
  • ASIC investigation leads to Cash Stop Financial Services Pty Ltd refunding more than 650 consumers (refer: 14-035MR).
  • ASIC commences legal action against Fast Access Finance (refer: 13-205MR).

In March 2014, PAID paid infringement notice penalties amounting to $30,600 for making misleading representations in its online advertisements (refer: 14-065 MR).

Last updated: 15/10/2014 12:00