[co-author: Sarah-Jane Dobson]
On 26 August 2014 the Federal Court determined that the Cash Store Pty Ltd (in liquidation), a payday lender, and Assistive Finance Australia Pty Ltd, a loan funder, committed seven separate breaches of their lending obligations under the National Consumer Credit Act 2009 (Cth) and breached unconscionable conduct provisions of the Australian Securities and Investments Commission Act 2001 (Cth).
Relevantly, Assistive Finance Australia Pty Ltd breached their key lending obligation, to not suggest, assist with or provide credit product that is unsuitable for a consumer, by failing to make the requisite enquiries as to the consumer’s requirements, objectives and financial situation when selling loans. This was particularly so given their clientele were low income earners or recipients of welfare benefits. The Cash Store Pty Ltd (in liquidation) was liable for Assistive Finance Australia Pty Ltd’s breaches pursuant to Section 169 of the National Consumer Credit Act 2009 (Cth).
The Cash Store Pty Ltd (in liquidation) acted unconscionably by selling consumer credit insurance for the loans sold by Assistive Finance Australia Pty Ltd where it was unlikely that such insurance could ever provide a benefit to the consumer.
The decision emphasises the steps that credit providers or licensees must take in respect of meaningfully assessing whether a credit product is suitable for the consumer in order to comply with their obligations under the National Consumer Credit Act 2009 (Cth). It further highlights the fact that the degree of such enquiries, and their nature, is dictated by the individual consumer in question.
The judgement is the outcome of the proceedings ASIC launched against the two companies in September last year. The amount payable by the companies for their breaches will be determined at a further hearing.
Click here to follow the link to the judgement.
Click here to follow the link to the ASIC media statement.