Consumer Action Law Centre has welcomed a Federal Court ruling that The Cash Store and Assistive Finance Australia Pty Ltd broke consumer credit laws and engaged in unconscionable conduct.
The Court found ‘that The Cash Store and Assistive Finance Australia failed to comply with their responsible lending obligations in relation to their customers, the majority of whom were on low incomes or in receipt of Centrelink benefits.’
The Court ruled that ‘loan officers routinely failed to make requisite inquiries and undertake verifications before arranging loans; routinely failed to inquire about purposes and objectives, and about consumers expenses and liabilities.’
Denise Boyd, Director of Policy and Campaigns at Consumer Action said the ruling sends a clear message to payday lenders – they need to make meaningful inquiries about their customers’ financial circumstances. ‘Payday lenders need to look at customers’ income and expenses, including day to day living costs, before offering them a loan.
‘When lenders assess a customer they must ascertain the customer’s reasons for taking out a loan, and this ruling suggests that ambiguous terms like “personal spending”, “living expenses” or “shortfall”, aren’t good enough,’ said Ms Boyd.
Consumer Action also welcomed the Court’s finding that The Cash Store acted unconscionably when it sold an insurance product alongside its payday loans. ‘The consumer credit insurance The Cash Store was selling was almost worthless to customers. It was an unnecessary product and, given most payday lending customers are struggling to make ends meet, the last thing they can afford is to have extra costs thrown on top of an expensive loan.’
Ms Boyd congratulated the Australian Securities and Investments Commission for taking action against The Cash Store and said the case helped clarify responsible lending laws for lawyers, credit providers and regulators alike.
‘We commend ASIC for its serious approach to responsible lending laws and willingness to take the necessary action, regardless of the size or profile of the business,’ said Ms Boyd.
The Federal Courts Decision can be found here.
Consumer Action first complained about The Cash Store selling insurance alongside its loans in June 2012.