Australian corporate watchdog cracks down on high-interest lenders

Australia's corporate regulator issued a warning to high-interest finance companies, or payday lenders, on Tuesday telling them to improve compliance and stop targeting "vulnerable lenders".

The Australian Securities and Investments Commission (ASIC), which enforces and regulates company and financial services laws to protect Australian consumers, found that payday lenders were offering high-interest loans, with annual interest fees of more than 30 percent, to people who could not afford repayments.

ASIC deputy chairman Peter Kell said the payday lending sector is on notice to improve its practices or further enforcement action is inevitable.

ASIC reviewed 288 consumer complaints for 13 payday lenders, who are responsible for more than 75 percent of payday loans made to consumers in Australia, and found some lenders engaging in conduct that risks breaching responsible lending obligations.

The review found problems around the tests for loan suitability, which must be considered when the consumer has multiple other payday loans or is in default under a payday loan.

ASIC's review follows a series of enforcement actions against payday lenders, including the recent Cash Store decision which saw penalties of almost 19 million Australian dollars (14.5 million U. S. dollars) handed down by the Federal Court for irresponsible lending and unconscionable conduct.

Kell said ASIC had a strong focus on the payday lending sector as its customers include some of the most financially vulnerable members of the community.

"ASIC will use its powers to reduce the risk of payday lenders providing unsuitable loans and to reduce the risk that financially vulnerable consumers get caught in a debt spiral, where new loans are effectively used to pay back old loans," Kell said. Endi