The Australian business watchdog is accused of conducting a “half-baked” investigation into loan programs run by Cash Converters, the country’s largest payday lender.
- Cash Converters has been ordered to repay loans to online customers
- Some customers with in-store loans were not covered by the ASIC survey
- ASIC Says Its Investigation Has Produced A “Good Result” For Consumers
Consumer advocates say the Australian Securities and Investments Commission (ASIC) investigation of Cash Converters last year was inadequate and thousands of customers may have missed refunds.
In November, Cash Converters agreed to pay fines and repay loans to the tune of $ 12 million after an ASIC investigation found it failed to properly verify whether customers who had taken out loans. loans could afford to repay them.
The ABC has learned that the same lending practices that put cash converters in hot water appear to have been used for clients in other areas of its business that were not included in the investigation. of ASIC.
“Unfortunately, the ASIC investigation in this particular case was half done,” said Jillian Williams, director of legal practice for the Consumer Action Law Center.
“I unfortunately think that there are too many people who missed out on the compensation to which they are entitled because ASIC made a deal with Cash Converters which meant that only certain people would get compensation due to the illegal behavior of Cash Converters. “
While many people who took out loans online will be compensated, those who took similar loans by going to the store were not covered by the ASIC investigation.
During its investigation, ASIC raised concerns about the company’s “benchmarking” method, which uses an internally generated figure to estimate the loan applicant’s living expenses.
This same benchmarking method has been used for a number of customers who have taken out store loans, but they are not eligible for reimbursement from Cash Converters.
“The unsuccessful people are probably the most vulnerable because they are the people who don’t go online and borrow money,” said Williams.
“They go to their local store which may be near a Centrelink office or near where they are playing.”
Cash Converters told the ABC that it operates in a heavily regulated industry.
“We recognize that there are more opportunities 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. industry in general and our customers in particular, “said a spokesperson. .
The company said customer satisfaction with its service is high.
“Cash Converters continues to work with the industry regulator, ASIC, and takes its responsibility to operate with the highest levels of integrity very seriously.”
Former client lashes out at loan predators
Andrew Ientile took out 21 loans at various Cash Converters stores over a 19-month period as he battled gambling addiction.
“I needed the money to meet my basic expenses so I just wanted to have enough money to get through the week,” he said.
Mr. Ientile initially borrowed only $ 550, but the loans quickly grew to $ 1,400.
Its loan documents show that its ability to repay its debts was assessed using the benchmarking method.
“Basically they’re predators, they’re more than willing to take advantage of people who want to come back to them for sure,” he said.
“And just the gross number of loans that have been approved, it’s staggering, it really makes me think about how do they actually do it?”
Since Mr. Ientile borrowed money in-store rather than online, he is not covered by ASIC’s action against Cash Converters.
“It struck me as a little strange that only those online are fined, not those in-store,” he said.
He still receives marketing texts and emails from Cash Converters telling him that he has the right to borrow more money.
ASIC defends the investigation
ASIC chief executive Michael Saadat said his online lending survey produced a “good result” for consumers.
“It was a decision to be able to achieve the most important outcome possible for as many consumers as possible in the time available, and therefore balancing all of these factors, we decided to focus on the online process,” said Mr. Saadat.
“Anyone who has concerns can certainly go to the ombudsman and have their case heard.”
In 2013, payday loan laws were tightened and fees were capped, although interest rates remain high.
The review of low-value credit contracts commissioned by the government last year made a series of recommendations to protect vulnerable borrowers.
“One of them I would probably call is the recommendation to ensure that no more than 10 percent of a consumer’s income is spent on paying off these payday loans,” Saadat said.
“What this recommendation will do once implemented is to ensure that already low-income consumers do not see those incomes completely overwhelmed by the repayments of these loans.”