Payday loans, which is a popular concept in the USA now has a flourishing and growing industry in Australia. It has grown in popularity in recent times in the US due to the failing economy and jobs situation in United States. In Australia recent job losses with the downturn in mining industry, random corporate job cuts and poor financial management has led to a growth in pay day loan companies.
There has been a spurt in growth of online payday loan companies that lend based on people filling in forms online and getting a loan with ease. These companies have got millions of dollars in loan books and are now coming under scrutiny for unfair lending practices by the regulatory body(ASIC).
The loan market for small loans or micro loans (payday loans) has gained notoriety not only in the Australia market, which is more recent, but has come into regulators scrutiny in many other countries like India and US and New zealand.
This market caters to people who are in desperate need of money and who most of the times are already in financial strife. Lending to such a group becomes a tricky situation where lending companies needs to grow their loan books, yet can’t really take undue advantage of the person’s poor financial position. Lending to them can put them at more risk and put them customers in more strife.
The question of balancing responsible lending and growing your business at the same time is a very fine line in this niche and local micro lending companies like cash converters and nimble have been taken up by ASIC for not being upto scratch on their lending practices.
Recently, following an ASIC investigation, payday lender Cash Converters (online website at www.cashconverters.com.au ) will refund $10.8 million to consumers who received small amount loans under approximately 118,000 small amount credit contracts. Cash Converters has paid a $1.35 million penalty following the issuing of infringement notices by ASIC.
ASIC had concerns that Cash Converters did not take reasonable steps to verify consumers’ expenses in accordance with its responsible lending obligations and subsequently entered into them in breach of the credit legislation.
Many customers of Cash Converters Loans may be eligible for a refund
· Refund eligible consumers $10.8 million in fees through a consumer remediation program overseen by an independent expert who will report to ASIC; and
Consumers who had two or more small amount loans in the 90 days before taking out another small amount loan through Cash Converters’ website during the period 1 July 2013 to 1 June 2016 should expect to be contacted in due course with information about their refund.
If you think you may have entered into a loan contract with Cash Converters (either in-store or online) that was unsuitable, you are encouraged to lodge a complaint with the Credit and Investments Ombudsman. If you need help lodging a complaint with the CIO, you can talk to a free and independent financial counsellor by ringing 1800 007 007 during business hours.
ASIC’s MoneySmart website has useful guidance on how payday loans work and alternative credit options.