In a statement sent to Mortgage Business yesterday, Fair Go Finance said that following a recent review of its ‘Flexi-Loan’, ASIC instructed the removal of the product and the reimbursement of customers using this loan type, “despite it being cheaper for the majority of customers”.
“At all times, and now, Fair Go Finance seeks legal advice from a reputable law firm for compliance of all its processes and consumer credit products, including the Flexi-Loan,” the group said in a statement.
“Furthermore, this loan and none of the loans ever offered by Fair Go Finance are ‘payday’ loans, which were abolished and made illegal in March 2013.”
Fair Go Finance’s response comes after ASIC announced yesterday that the group has paid $34,000 in infringement notices for “overcharging interest and establishment fees on payday loans”.
An ASIC investigation into Fair Go Finance's 'Flexi Loan' product identified that the loans were set up in a manner that attempted to avoid the protections offered to consumers under the National Credit Act.
However, Fair Go Finance managing director Paul Walshe said: “It was not our intention to avoid these protections and put our customers in a worse position. We have an important relationship with our customers and it is essential we are transparent about the costs of loans.”
In addition to the Flexi-Loan, Fair go Finance also offered another type of loan, a Small Amount Credit Contract (SACC), which, under the NCCP, has “many built in protections for customers”, Mr Walshe said.
“We created the Flexi-Loan to give customers a choice when taking out a personal loan and to better meet the requirements of some customers,” he said.
“Not only did the product give customers flexibility to alter the amount and length of repayments without charge or being in default, it was on average $164 cheaper than the alternative SACC loan.
“However, in some cases customers paid back their loan quicker than they anticipated, which, in hindsight, meant a SACC loan could have been a better product for them. Had this been known at the time the customer took the loan, they would have either chosen or been offered a SACC loan.”
Mr Walshe noted that upon notification of ASIC’s concerns about the Flexi-Loan in June last year, Fair Go Finance immediately removed it from the market and fully cooperated with the regulator’s review.
He added that during its review, ASIC found nothing of concern regarding the company’s other loan products, manuals, procedures and scores of files provided.
In response to the review, Fair Go Finance has paid $34,000 in fines and is now refunding approximately $30,000 to borrowers.
“Fair Go Finance is committed to being a responsible lender, carrying out in-depth checks, speaking with borrowers to assess their needs and providing financial products which meet their needs,” Mr Walshe said.
[Related: Is a payday loan ever a good idea?]