ASIC sets sights on ‘predatory’ short-term credit providers

ASIC sets sights on ‘predatory’ short-term credit providers

July 10, 2019 Off By administrator

Photo by Casey Allen on Unsplash

ASIC may soon be flexing its new product intervention powers by going after short-term credit providers charging loan fees worth nearly 1000% of the original loan amount.

The regulator released a consultation paper on Tuesday on the first proposed use of its new product intervention power – powers that would allow it to intervene where financial and credit products result in ‘significant consumer detriment’.

In its paper, ASIC states it considers significant consumer detriment may arise in relation to short term credit providers charging high costs to vulnerable customers, which could be those on low incomes or in financial difficulty.

And its first target is two firms – Cigno Pty Ltd and Gold-Silver Standard Finance Pty Ltd.

These short-term credit providers charge substantial fees under separate contracts, which can add up to as much as 990% on the original loan amount.

Source: Consumer Action

Companies such as Cigno claim to be ‘agents’ rather than lenders and arrange cash loans up to $1,000.

Due to the structure of its ‘loans’, Cigno is not regulated in the same way other payday lenders are.

Here’s a table listing the fees Cigno can charge on any given loan.

Fee Amount 
Lender fee 5% of loan amount (One-off payment)
Financial supply fee See below 
– 1 payment loan 35% of loan amount
– 2 payment loan 45% of loan amount
– 3 payment loan 60% of loan amount
– 4 payment loan 75% of loan amount
Account keeping fee $5.95 per week
Same day deposit fee (optional) $16
Priority transfer fee (optional) $16
Extension of first payment fee (if requested) $20
Change of date & amount fee (if requested) $20
Payment Reschedule Fee (if requested): $30.00
Collections Phone Contact Fee: $8.80
Collections Tracking Fee: $50.00
Investigator/Hand Over Fee: $175.00 (plus legal fees)
1st Dishonour Letter Fee: $30.00
2nd Dishonour Letter Fee: $50.00
3rd Dishonour Letter Fee: $50.00
Dishonoured Payment Fee: $49.00

Source: Cigno

ASIC Commissioner Sean Hughes said they’d already seen too many examples of significant harm affecting vulnerable members of the community through this short-term lending model.

“Consumers and their representatives have brought many instances of the impacts of this type of lending model to us,” he said.

“Given we only recently received this additional power, then it is both timely and vital that we consult on our use of this tool to protect consumers from significant harms which arise from this type of product.

“Before we exercise our powers, we must consult with affected and interested parties.”

“Intervention well overdue”

The Financial Rights Legal Centre (Financial Rights) welcomed ASIC’s announcement they’ll be cracking down on short-term credit providers like Cigno.

Financial Rights’ Chief Executive Officer Karen Cox said they had regularly seen “shocking” examples of vulnerable people being charged ridiculous fees.


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