ASIC has suspended the Australian credit licence of a lender and its subsidiary, a lead generation company.
Payday lender PAID International Ltd (PAID) has had its licence suspended until 7 April 2016 because it ceased to engage in credit activities and is insolvent, according to the corporate watchdog.
In a statement today ASIC said an external administrator was appointed to PAID in January 2015 and the company entered into a deed of company arrangement (DOCA) – a binding arrangement between the company and its creditors – in March 2015.
In October 2014, as part of an enforceable undertaking (EU) accepted by ASIC, the company agreed to refund customers who were charged excessive loan fees.
The DOCA provides that the eligible customers under the EU receive their refund. The deed administrator has since admitted a total amount of $913,946 of claims in relation to the 6,650 consumers owed a refund under the EU and anticipates a total dividend of 45 cents in the dollar to be distributed to unsecured creditors including the eligible consumers under the EU.
As at the end of June 2015, $239,308 has been refunded.
ASIC has also cancelled the Australian credit licence of Leadfish Pty Ltd, a lead generation company and subsidiary of PAID.
The news comes after ASIC put the payday lending industry on notice earlier this year.
In March the corporate regulator released a report which found payday lenders need to improve compliance with some of the key consumer protection laws operating in the industry.
The review found that payday lenders are falling short in meeting important new obligations introduced as part of the small amount lending reforms in 2013.
ASIC deputy chairman Peter Kell confirmed the payday lending sector was on notice to improve its practices or further enforcement action is “inevitable”.
“ASIC’s particular focus on payday lending is part of our wider scrutiny of the broader consumer credit regime, which takes on banks and other non-bank lenders,” Mr Kell said at the time.
“Our actions demonstrate ASIC’s commitment to address particular consumer credit risks in our market.”
ASIC’s review of 288 consumer files from 13 payday lenders – who are responsible for more than 75 per cent of payday loans made to consumers in Australia – found some lenders engaging in conduct that risks breaching responsible lending obligations.
The review found particular compliance risks around the tests for loan suitability, which must be considered when the consumer has multiple payday loans or is in default under a payday loan.
The ASIC review also identified concerns where payday lenders set their loan terms at 12 months or more, thereby charging the consumer more fees in circumstances where a consumer requested a shorter term and paid the loan back in that shorter time.
James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.
He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.
He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.
James holds a BA (Hons) in English Literature and an MA in Journalism.
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