It has been announced that Cash Converters, a short-term, high-interest loan provider in Australia, will refund borrowers more than $10 million. Following an investigation by a federal consumer watchdog agency, it was determined that the payday loan company did not meet responsible lending rules.
According to the Australian Securities and Investments Commission (AISC), Cash Converters will be ordered to pay fines totaling roughly $1.35 million. These fines are part of 30 infringement notices provided by the AISC, which discovered that the payday loans were unsuitable.
The AISC confirmed that the terms of the payday loans had violated the National Credit Act. As part of the legislation, loans were created for customers who had already received two or more loans online. This is a breach of the current regulations for the payday loan industry, which have been amplified in recent years.
Once the investigation was concluded, it was found that about 118,000 payday loans deemed unsuitable were issued to clients. Cash Converters admitted to wrongdoing and is working with the AISC.
“Asic is seeking to protect financially vulnerable consumers, many of whom are recipients of welfare payments, from falling victim to unsuitable payday loans,” said Peter Kell, the deputy chairman of ASIC, in a statement. “Payday lending is a high priority area for Asic and we will continue to pursue lenders who do not follow their responsible lending obligations.”
Moving forward, a panel of independent experts will be appointed to monitor and oversee Cash Converters’s refund and remuneration program for customers. These experts will also take a look at the payday loan company’s overall business model and general compliance with national credit laws.
If you took out a payday loan from Cash Converters between July 1, 2013 and June 1, 2016 then you will be contacted pertaining to your share of the near $11 million in client refunds.
It has been estimated that more than one million Australia consumers take out a payday loan each year. It’s believed that the payday loan industry is worth as much as $1 billion as of 2012.
Although public officials have examined the payday loan issue in Australia and have demanded action, the federal government has yet to take any serious action or impose significant legislation.
Critics of payday loans have regularly argued that these small-dollar loans tend to negatively impact low- and middle-income Australians who rely on these alternative financial products. They say that payday loans online place them at a disadvantage and send them into an endless cycle of debt.
On the other hand, proponents aver that the banking industry does not extend traditional forms of credit to the impecunious, adding that many Australians are either unbanked or underbanked. This has been a common theme across North America and Europe: if you’re not a part of the system, or a regular participant, then you will turn to an array of alternative pecuniary options, like payday loans, check cashing services and prepaid cards.