ASIC to crack down on predatory lending

The Australian Securities Investment Commission (ASIC) has unveiled its plans to intensify efforts against predatory lending practices, aiming to safeguard both vulnerable consumers and small businesses, as part of its recently released corporate strategy.

The latest corporate strategy underscores ASIC’s emphasis on combating scams linked to cryptocurrency, artificial intelligence, and predatory lending.

In a climate where digital misconduct, scams, and predatory lending schemes are on the rise, ASIC said it was taking decisive steps to protect Australian consumers and small businesses.

ASIC chair Joe Longo said ASIC will sharpen its focus on predatory lending practices and non-compliance with new consumer protections relating to small amount credit contracts and consumer leases.

“We will also take action against conduct that unfairly impacts small businesses, including in relation to unfair contract terms and supply of unsuitable products,” Mr Longo said.

“We are responding to key trends and emerging issues in the regulatory landscape, where there are major shifts across sustainable finance, the digital and data economy, and an ageing population.”

In its outlook for the upcoming year, commencing from July 2023, ASIC has pinpointed pivotal projects and areas of enforcement. These include:

• Improving credit financial hardship arrangements: ASIC will take enforcement measures in cases of serious non-compliance by lenders with hardship provisions.
• Reviewing the compliance practices of debt management firms: The regulator will undertake a targeted evaluation of the policies, practices, and protocols of high-risk debt management firms.
• Protecting financially vulnerable credit consumers: ASIC will persist in taking action, including enforcement, to shield financially susceptible consumers impacted by:
  • Predatory lending strategies
  • Violations of new consumer safeguards related to minor credit agreements and consumer leases
  • High-cost credit, encompassing conduct by unlicensed or ‘fringe’ entities
  • Misconduct in debt collection
• Supporting work on the regulation of buy now, pay later (BNPL) products: ASIC will support the Treasury’s endeavours to implement a regulatory structure for BNPL products, following the government’s announcement in May 2023 to regulate these products.

AI and technology focus

In addition to its focus on lending practices, ASIC acknowledges the transformative role of emerging technologies, such as artificial intelligence, in reshaping the financial landscape.

Given the proliferation of interconnected digital services, the regulator noted the threat of cyber attacks remained a significant concern, capable of causing widespread disruption and financial losses.

In fact, between 1 July 2021 and 30 June 2022, more than 31,700 customers of the four major banks collectively lost more than $558 million through scams.

Mr Longo highlighted ASIC’s commitment to harnessing all available tools to detect and thwart scams, alongside educating and alerting consumers through targeted communication efforts.

“We will also maintain our data-informed approach and work with other agencies to respond to investment scams more effectively,” Mr Longo said.

Another key focus area involves combating digital-enabled misconduct by actively supervising regulated entities to ensure the implementation of robust cyber resilience and risk management protocols.

Simultaneously, ASIC said it will “will explore the potential uses of artificial intelligence and other technologies by ASIC as a leading digitally enabled, data-informed regulator.”

The strategic plan also highlights a concern for scams involving crypto assets and the broader risks these products pose to investors.

The plan follows a year of progress against the organisation’s strategic priorities and strong enforcement outcomes in 2022–23.

ASIC’s new structure came into effect in July 2023.

“A key priority for me is to ensure the structure better supports the prioritisation of enforcement and regulatory issues, quicker decision making, and operational flexibility,” Mr Longo said.

[Related: ASIC welcomes 3 new commissioners]