ASIC Consultation Paper 316: Using the product intervention power: Short term credit
Businesses such as Cigno Pty Ltd, which facilitate access to predatory and unregulated payday loans by exploiting loopholes in the law, are on notice as the Australian Securities and Investment Commission (ASIC) confirms its intention to use its new regulatory powers.
Consumer Action and Finacial Rights Legal Centre have responded to ASIC’s consultation paper that outlines how ASIC intends to use new Product Intervention Powers (PIPs) to address significant consumer detriment in the short-term credit industry.
Companies like Cigno say that they are an ‘agent’ rather than a lender, and that they arrange short-term cash loans of up to $1,000. The company says its “choice lender” is Gold Silver Standard Finance Pty Ltd (GSSF), which provides a loan that fits within the ‘short term credit exemption’. However, Cigno charges substantial additional fees, including fees to receive the loan funds on the same day. Due to its structure, Cigno is not regulated the way other payday lenders are, meaning it doesn’t comply with responsible lending laws.
This joint submission welcome ASIC’s use of the PIP to limit the fees that can be charged by certain short-term lending business models to the level that may be charged under the ‘short term credit exemption’ that exists in national credit laws. This would prevent such arrangements where businesses separate to the lender charge significant additional fees and charges related to the loan, without any requirement to ensure affordability.
This submission provides additional information to assist ASIC in determining appropriate regulatory action that we hope will put a stop to the significant consumer detriment that is causes be these models of short-term lending.