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Cash Converters to refund millions to pay day loan customers

Wednesday, 9 Nov 2016 08:38:31 | Amy Bainbridge

Cash Converters has paid a total of $1.35 million for 30 infringement notices. (ABC News: Giulio Saggin, file photo)

Payday lender Cash Converters will refund consumers millions of dollars and pay an infringement notice after an investigation by the Australian Securities and Investments Commission (ASIC).

Key Points

  • Refunds on 118,000 small credit contracts
  • Cash Converters to refund $10.8 million in fees
  • ASIC says Cash Converters violated responsible lending obligations

The refunds relate to 118,000 small amount credit contracts, or loans.

ASIC had raised concerns that the company had failed to make reasonable inquiries into consumers' income and expenses and the loans they issued were "unsuitable".

Cash Converters has paid a total of $1.35 million for 30 infringement notices from ASIC.

It has also agreed to refund eligible consumers $10.8 million in fees through a remediation program overseen by an independent expert who will report to ASIC.

ASIC also flagged concerns that Cash Converters had not taken reasonable steps to verify consumers expenses in accordance with its responsible lending obligations.

The regulator's deputy chairman Peter Kell said he is particularly worried about lending to welfare recipients.

"ASIC is seeking to protect financially vulnerable consumers, many of whom are recipients of welfare payments, from falling victim to unsuitable payday loans," he said.

"Payday lending is a high priority area for ASIC, and we will continue to pursue lenders who do not follow their responsible lending obligations."

The independent expert will also review Cash Converters' business operations.

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 will be contacted with information about their refund.

People are advised to lodge a complaint with the Credit and Investment Ombudsman if they believe they entered a loan contract with Cash Converters either in-store on online that was unsuitable.

Refunds are 'without admission of wrongdoing'

Cash Converters released a statement to the Australian Stock Exchange this morning saying it had cooperated with the ASIC investigation.

"The company has offered, and ASIC has accepted, an Enforceable Undertaking (EU) in relation to the matters investigated," it said.

"In accordance with the EU, the company will remediate certain customers who applied for and were granted small amount credit contracts via the Cash Converters website in the period 1 July 2013 to 1 June 2016.

"The company has been given an extensive release by ASIC, and entry into the EU is without admission of wrongdoing."

Denise Boyd from the Consumer Action Law Centre told the ABC that ASIC's action is "very welcome" but there is "a deep rooted problem in the payday lending industry".

"The industry seems to be unable or unwilling to lend responsibly," she said.

"If the biggest player in the market has been found to have such a serious problem that now has to pay back millions of dollars to people that it has irresponsibly lent to, then I think it throws a serious question mark over the legitimacy and responsibility of the entire industry."

AustraliaPlus


 

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