Tuesday, 9 July 2019
The Financial Rights Legal Centre (Financial Rights) has welcomed the Australian Securities and Investment Commission’s (ASIC’s) announcement that they will consult on using new Product Intervention Powers to intervene in the short term credit industry.
The new product intervention power allows ASIC to intervene where financial and credit products have resulted in or are likely to result in, significant consumer detriment.
Businesses such as Cigno Pty Ltd and Gold-Silver Standard Finance Pty Ltd provide short term credit using methods which purport to avoid pay day lending regulations, charging fees under separate contracts that can add up to exorbitant amounts.
“The business models of pay day lenders like Cigno and Gold-Silver standard are designed to avoid the law and exploit the most financially vulnerable people in Australia,” said Karen Cox, Chief Executive Officer of Financial Rights Legal Centre.
“We regularly see shocking examples of people who have used these services being charged ridiculous fees. We have seen examples where these companies have demanded between 146% and 952% of the original amount borrowed. A large proportion of our clients owe 400% of the amount they originally borrowed or more. A small loan of $150 turns into hundreds of dollars within a very short time. This exploitation is way outside of the boundaries of acceptable behaviour.
“Many of the people we speak to end up being directed to these pay day lenders because they are struggling with other debts (like electricity or phone bills) and are unable to access credit from mainstream sources. A significant proportion are referred to these lenders after being rejected for other pay day loans because it is clear they cannot afford to repay them. Many of our clients have illnesses, disabilities or addictions. These business models blatantly exploit vulnerability and financial hardship for profit.
“Intervention in this space is well overdue and we are pleased to see ASIC proposing to take action here and particularly pleased to see ASIC take on this business model which targets some of the most vulnerable people in Australia as their very first use of the product intervention powers.”
For further information contact Peter Vincent: Communications and Campaigns Officer email@example.com, 0421 389 685 or 02 8204 1372. Karen Cox, Chief Executive Officer of Financial Rights is available for further comment.