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Tuesday 25 November 2014

14-313MR Payday lender penalised for breaching new responsible lending laws

Payday lender Abaz Pty Ltd (Abaz), which offers loans nationally through the ‘www.moneyplus.com.au’ website, has paid a $42,500 penalty after ASIC issued it with an infringement notice for failing to obtain required account statements from consumers.

In March 2013, new laws commenced which enhanced the responsible lending rules for small amount or payday lenders. This includes a requirement that lenders must obtain and consider consumers' bank statements from authorised deposit-taking institutions (ADIs) (i.e. banks, credit unions and building societies) that cover at least the last 90 days where income payable to the consumer is credited.

Deputy Chairman Peter Kell said, 'The enhanced responsible lending obligations aim to prevent payday or small amount lenders providing unsuitable loans and to reduce the risk that vulnerable consumers' debts will spiral out of control.

'Payday lenders must obtain bank statements that cover at least the last 90 days from each consumer and then consider the information in those statements before they are in a position to assess whether the consumer can afford to take on the loan.'

Abaz has updated its responsible lending policies and procedures to comply with the new requirements and has appointed an independent compliance consultant to review these practices.

ASIC can issue an infringement notice where it has reasonable grounds to believe a person has contravened certain consumer protection laws. The payment of an infringement notice is not an admission of a contravention of the National Consumer Credit Protection Act 2009.

Download the infringement notice

Background

From March 2013, credit providers who enter into small amount credit contracts must meet additional responsible lending laws. A small amount loan, in general terms, is a loan where the amount borrowed is $2,000 or less and the term is between 16 days and one year. The new requirements include:

  • a cap on the costs that can be charged for payday loans
  • providing a warning statement to the consumer which contains information about the alternatives to a payday loan, and
  • obtaining and considering consumers' account statements for any account at an ADI where the consumer is credited income that cover at least the past 90 days.

The enhanced responsible lending laws also include a presumption that a small amount loan will be unsuitable where a consumer either:

  • is a debtor in default under another small amount loan, or
  • has entered into two or more other small amount loans in the last 90 days.

ASIC has recently taken the following actions to address compliance concerns by payday lenders:

  • Small amount lender pays $30,600 penalty for misleading online advertisements (refer: 14-065MR).
  • Payday lender engages in unconscionable conduct and breaches consumer credit laws (refer: 14-220MR).
  • ASIC takes action against payday lending businesses (refer: 14-150MR).
Last updated: 25/11/2014 12:00