A personal finance company has paid more than half a million dollars to the National Debt Helpline after being found to have contacted customers too frequently and reporting incorrect information to Equifax.
An ASIC surveillance found that Cash Converters Personal Finance Pty Ltd (“Cash Converters”) had “systematically failed” to meet regulatory guidelines on debt collection practices, including by too frequently contacting consumers.
In a bid to reduce the likelihood of harassment and coercion, the regulatory guide Debt collection guidelines: For collectors and creditors (RG 96) recommends that consumers be contacted less than three times a week (or less than 10 times a month) regarding a debt.
However, an ASIC investigation found that, as a result of “poor internal controls and policies”, Cash Converters routinely breached this guideline.
The financial services regulator also found that a related company had provided incorrect information to consumer credit reporting agency Equifax.
Safrock Finance Corporation (Qld) Pty Ltd was found to have provided to Equifax the total amount of debt owed by consumers rather than the total outstanding balance.
This error may have resulted in up to 38,500 customers being reported with inaccurate amounts owing over a one-month period, according to ASIC.
Following the investigation, Cash Converters is now reportedly outsourcing all debt collection work to a specialist third-party debt collector.
It has also paid a $650,000 community benefit payment to help fund the National Debt Helpline, which assists consumers who have trouble managing debt or paying bills.
ASIC has also imposed licence conditions on Cash Converters to require it to obtain ASIC’s consent before bringing debt collection activities back in-house.
The lender has also worked with Equifax to ensure all incorrect credit listings have been removed.
Speaking after the announcement, ASIC deputy chair Peter Kell said: “Consumers expect to be treated fairly and in a manner that complies with consumer protection laws.
“ASIC expects all financial service providers to have appropriate systems and controls in place to ensure that debt collection practices are consistent with the guidelines.
“It is also critical that licensees ensure that credit information provided to credit bureaus is accurate.”
The payday lender has previously paid a sizeable enforceable undertaking after it was alleged by ASIC that it breached the National Credit Act by failing to make reasonable inquiries into consumers’ income and expenses.
In 2016, ASIC agreed to accept an enforceable undertaking from Cash Converters following concerns that it failed to make reasonable inquiries into consumers’ income and expenses in some small-amount loans processed via its website.
Instead of assessing the actual expenses recorded in a consumer’s bank statements, Cash Converters reportedly applied an “internally generated assumed benchmark that had no relationship to the real expenses of the individual consumer”.
Under the enforceable undertaking accepted by ASIC, Cash Converters refunded eligible consumers $10.8 million in fees through a consumer remediation program and reviewed its business operations and compliance with the consumer credit regime.