An Australian lender has been fined by ASIC for overcharging its clients.
Following ASIC intervention, Fair Go Finance Pty Ltd has paid $34,000 in infringement notices for overcharging interest and establishment fees on payday loans. Fair Go Finance will also refund approximately 550 consumers around $34,500 for the interest and fees it collected from consumers in excess of the maximum amount allowed under the NCCP.
An ASIC investigation into Fair Go Finance’s ‘Flexi Loan’ product identified that the loans were set up in a manner that attempted to avoid the protections offered to consumers under the National Credit Act.
Although the credit contracts stated the loans could be repaid over a three year period, in practice the consumer was required to repay the loan over a substantially shorter period, according to an ASIC statement.
“Consumers were also charged a default fee if they failed to meet the shorter repayment terms,” it said.
ASIC identified that Fair Go Finance charged establishment fees of more than twice the 20 per cent maximum allowed. Furthermore, in a number of instances the total amount repaid by consumers over the term of the loan exceeded the maximum amount allowed under the National Credit Act.
Following ASIC’s intervention, Fair Go Finance withdrew the Flexi Loan product.
“Some payday lenders are still attempting to avoid key protections for consumers of small amount loans,” ASIC deputy chair Peter Kell said.
“ASIC will continue its focus on the payday lending market so that vulnerable consumers are not denied important protections under the law,” he said.
ASIC acknowledged Fair Go Finance’s co-operation in the matter. Fair Go Finance is taking action to repay consumers and ensure its staff are aware of their responsibilities under the National Credit Act.
An external compliance consultant has also been engaged to undertake a review of Fair Go Finance’s business operations and to report back to ASIC.