Consumer Action has welcomed the Australian Securities and Investment Commission’s (ASIC) announcement that it is suing Sunshine Loans for breaches of the National Credit Code for charging unlawful fees on small amount credit contracts (or payday loans).
ASIC alleges that Sunshine Loans charged thousands of borrowers a fee to reschedule the date a repayment on their loan was due—a type of fee not permitted under the National Credit Code. Under its ‘standard terms’, Sunshine Loans charged customers a $35 fee to change a payment due date—the same amount they charge for missing a scheduled payment.
Payday lenders are permitted to charge a monthly fee of 4% of the amount borrowed, on top of an establishment fee of 20% of the amount borrowed, on loans of up to $2,000. These fees on short-term loans can equate to an equivalent annual interest rate of over 200%. Payday loans typically target people in, or at risk of, financial hardship.
“The alleged fees in this case are just another eye-watering example of payday lenders trying to squeeze every last cent out of customers,” said Consumer Action Policy Officer, Tom Abourizk.
“These fees were charged to people who had engaged with Sunshine Loans due to their inability to pay and it stinks that they are being punished for this with a $35 fee.
“We applaud ASIC taking action to reign in excessive fees such as these, however this case demonstrates that there is a pressing need for stronger consumer protections in relation to high-cost credit products,” said Abourizk.
“The former Federal Government sat on reforms recommended by its own independent expert panel for over five years. This was despite committing to enacting changes. These reforms would introduce additional protections to reduce the risk of payday loans and consumer leases pushing people into a debt spiral. They would also address harm associated with unsolicited marketing, and outlaw regulatory avoidance business models, which remains a substantial problem.
“Legislation to make payday loans and consumer leases safer and less harmful has been drafted by Treasury. Labor pushed for these reforms in opposition and now is the time for the new Federal Government to deliver.
Further delay means more excessive fees that will exacerbate cost-of-living pressures for people experiencing vulnerability. They must be treated as a priority.”