In May 2023, ASIC commenced proceedings against Money3 Loans Pty Ltd in relation to their responsible lending obligations when providing finance for the purchase of second-hand vehicles.
Australian Credit Licence holders have an obligation to ensure that they do not suggest or assist a consumer to apply for a credit contract/consumer lease if that credit contract/consumer lease is unsuitable for the consumer. In meeting this obligation, credit licensees must obtain information regarding the purpose of the loan or consumer lease to appropriately assess whether the loan or consumer lease adequately meets the consumer's needs and objectives.
Summary of ASIC's Enforcement Action:
ASIC has alleged that Money3 Loans:
- failed to properly assess whether consumers could meet their repayment obligations before entering into loan contracts;
- failed to assess whether consumers could meet their repayment obligations without experiencing financial hardship;
- failed to make reasonable inquiries or verify the consumer's financial situation, objectives and requirements; and
- failed to take reasonable steps to ensure its representatives complied with the credit legislation and were adequately trained and competent.
Before Money3 Loans entered into a contract with a consumer, Money3 Loans:
- conducted a serviceability assessment and applied a number of arbitrary expense amounts without taking into account the consumer's individual financial situation;
- did not make any assessment as to whether the credit contract met the consumer's requirements or objectives;
- did not make an assessment as to whether the credit contract was unsuitable for the consumer; and
- did not state the period for which any assessment covered.
Implications for Licensees?
All credit licensees that are required to comply with the Responsible Lending obligations should:
- ensure they regularly review and update their responsible lending policies;
- provide adequate training, professional development and instructional assistance to staff in relation to the Licensee's responsible lending policies and procedures'
- provide staff with adequate templates, forms, checklists or guides to competently carry out an assessment as to the unsuitability of credit contracts including case studies and examples;
- ensure staff carry out an individual assessment of a consumer's income and expenses and do not apply minimum or arbitrary expense amounts;
- ensure that it is continually assessing the skills and competence of staff in carrying out assessments;
- ensure records are kept in relation to the preliminary and/or final assessment of suitability; and
- continually review cases of hardship to determine whether this will impact a consumer's obligation to meet repayments.
Background:
The National Consumer and Credit Protection Act 2009 (Cth) provides consumer protections to ensure that Australian credit licensees are making reasonable inquiries about a consumer's financial situation, objectives and needs to assess whether a loan contract or consumer lease is unsuitable for the consumer.
If you would like to speak to us about how we could help your business to comply with the responsible lending obligations, please contact us. You may like to purchase our responsible lending policy here.
Further Reading:
ASIC Media Release - ASIC sues Money3 Loans for responsible lending breaches
ASIC Regulatory Guide 209 - Credit Licensing: Responsible Lending Conduct
ASIC Crackdown on Responsible Lending Practices
ASIC Spotlight Remains on Interest-Only Loans and Responsible Lending Practices
Concise Statement - Australian Securities & Investments Commission v Money3 Loans Pty Ltd
