Two Australian payday lenders have entered into an enforceable undertaking (EU) with ASIC to cease using a certain loan, following concerns that the product may not have complied with credit laws.
In a statement this week, ASIC announced that lenders WebMoneyline and Good Go Loans have entered into an EU with the regulator.
ASIC's investigation identified that the loan product, called OACC2, was provided to consumers on terms that fell outside the definition of a small amount credit contract.
However, on the same day consumers entered into an OACC2 loan, almost all of the OACC2 agreements were modified to repay the loan at higher regular repayment amounts over a shorter period of time, which may have exposed consumers to a higher risk of default.
According to ASIC, Good to Go Loans and Web Moneyline may have charged above the cap on fees and charges had the loans been construed as small amount credit contracts as defined under the National Credit Act.
Under the EU, Good to Go Loans and Web Moneyline are required to:
• write off all outstanding OACC2 loans including any outstanding debts which have arisen as a result of entering into these loans;
• notify the relevant credit reporting body that these loans have been settled, in order to correct the affected consumers' credit records; and
• not enter into the OACC2 loan product with any new consumers.
“ASIC will continue to take action to protect financially vulnerable consumers, many of whom are recipients of welfare payments, from falling victim to unsuitable payday loans,” ASIC deputy chairman Peter Kell said.