Cash Converters loans Corporate watchdog ASIC – s investigation into payday lender – half-baked – AB
Corporate watchdog ASIC&039,s investigation into Cash Converters loans labelled as half-baked
Australia’s corporate watchdog is being accused of conducting a “half-baked” investigation into loan schemes run by Cash Converters, the nation’s largest payday lender.
- Cash Converters was ordered to refund loans to online customers
- Some customers who took out loans in store were not covered by ASIC investigation
- ASIC says its investigation produced a “good outcome” for consumers
Consumer advocates say the Australian Securities and Investments Commission’s (ASIC) investigation into Cash Converters last year was inadequate, and thousands of customers may have missed out on refunds.
In November, Cash Converters agreed to pay fines and refund loans to the tune of $12 million after an ASIC investigation exposed it had not decently checked if customers who took out loans could afford to pay them back.
The ABC has learned the same lending practices that landed Cash Converters in hot water, emerge to have been used for customers in other sections of its business that were not included in ASIC’s investigation.
“Unluckily ASIC’s investigation in this particular case was half-baked,” said the Consumer Act Law Centre’s Director of Legal Practice Jillian Williams.
“I think unluckily there are too many people who have missed out on compensation they are entitled to because ASIC struck a deal with Cash Converters that meant that only some people would be obtaining compensation as a result of Cash Converters’ unlawful behaviour.”
Photo Consumer advocate Jillian Williams described ASIC’s investigation as half-baked.
While many people who took out loans online will be compensated, those who took out similar loans by going into the store were not covered by ASIC’s investigation.
During its investigation ASIC raised concerns about the company’s ‘benchmarking’ method, which uses an internally-generated figure to assess the living expenses of the loan applicant.
That same benchmarking method has been used for a number of customers who took out loans in store, yet they are not eligible for a refund from Cash Converters.
“The people who have missed out are likely to be the most vulnerable because they’re the people who don’t get online and borrow money,” Ms Williams said.
“They go into their local store which may be near a Centrelink office or near the venue at which they gamble.”
Cash Converters told the ABC it was operating in a intensely regulated industry.
“We recognise that there is more scope for improvement in our industry and we are proactively building relationships with regulators, ombudsmen and advocacy groups, to be at the forefront of regulatory reform that will benefit the industry generally and our customers specifically,” a spokeswoman said.
The company said customer satisfaction with its service was high.
“Cash Converters resumes to work collaboratively with the industry regulator, ASIC, and takes very gravely its responsibility to operate with the highest levels of integrity.”
Former customer hits out at loan ‘predators’
Photo Andrew Ientile borrowed thousands of dollars to help fund his gambling addiction.
Andrew Ientile took out 21 loans in various Cash Converters stores over a Nineteen month period as he struggled with a gambling addiction.
“I needed the money to cope with my basic living expenses, so I was just aiming to have enough money to get me through the week,” he said.
Mr Ientile primarily borrowed just $550, but the loans soon grew to as much as $1,400.
Photo Mr Ientile still receives marketing text messages and emails from Cash Converters.
His loan documents display his capacity to repay his debts was assessed using the benchmarking method.
“Basically they’re predators, they’re more than willing to take advantage of people that are wanting to go back to them for sure,” he said.
“And just the raw number of loans that were approved, it’s staggering, it actually makes me think how do they actually do it?”
Because Mr Ientile borrowed money in store rather than online, he is not covered by ASIC’s activity against Cash Converters.
“It just kind of struck me as a little bit odd that it was only the online ones that got fined, not the in store ones,” he said.
He still receives marketing text messages and emails from Cash Converters telling him he is entitled to borrow more money.
ASIC defends investigation
ASIC senior executive Michael Saadat said its investigation into online lending produced a “good outcome” for consumers.
“It was a decision about being able to reach the most significant outcome we could for the most number of consumers in the time available, and so in balancing all of those factors we determined to concentrate on the online process,” Mr Saadat said.
“Anybody who’s got any concerns can certainly go to the Ombudsman and have their case heard.”
In 2013 payday lending laws were tightened and fees were capped, albeit interest rates remain high.
Last year’s government-commissioned review of petite amount credit contracts made a series of recommendations to protect vulnerable borrowers.
“One of them that I would call out is very likely the recommendation ensuring that no more than Ten per cent of a consumer’s income is dedicated to making repayments on these payday loans,” Mr Saadat said.
“What that recommendation will do once it’s implemented is ensure that consumers already on low incomes don’t have those incomes entirely dazed by the repayments for those loans.”