An ‘agile’ credit provider with the tagline ’smart little loans’ has been in hot water twice recently, costing them $1.5 million.
Firstly, the company was in trouble for encouraging people to utilise their payday loans to cover things like utility bills — rather than exhausting other options such as provider’s hardship programs — and now the Australian Securities and Investment Commission (ASIC) has found significant issues with their compliance arrangements, as they failed to meet their responsible lending obligations. The payday loan provider has not been assessing the financial circumstances of consumers properly, or identifying when customers were repeatedly obtaining loans from them in a short space of time.
The National Consumer Credit Protection Act (NCC), part of Australia’s consumer credit law reform, started licensing consumer credit providers and credit assistance providers from 1 July 2010. New obligations, including responsible lending obligations and consequences, came into effect. This included ensuring that those who you employ (i.e. your representatives):
- are competent to engage in credit activities
- understand and comply with credit legislation
- are adequately trained.
- The NCC was designed to reduce cases of prejudicial or inappropriate loans.
Who needs to hold a credit licence?
Anyone who engages in ‘credit activities’. So then what is a credit activity? Credit activity occurs if an individual:
- provides credit under a regulated credit contract (regulated by the NCC)
- has a business in providing regulated credit
- provides credit assistance
- is an intermediary
- is a lessor under a regulated consumer lease
- has a business of providing regulated consumer leases
- is a mortgagee under a regulated mortgage
- is a beneficiary of a regulated guarantee.
Who represents you?
Ensuring those who represent you do so with a clear understanding of consumer credit law is a smart way to avoid the brand and financial damage the payday loan company incurred.
Our National Consumer Credit Protection Act compliance training helps to ensure that those representing your brand understand their obligations.