Company watchdog the Australian Securities and Investments Commission (ASIC) is investigating online lender Barclay Finance as consumer groups raise concerns about a new front of unregulated lending.

Consumer Action Law Centre says Barclay is offering loans to vulnerable, low-income people who have no hope of paying the money back.

The ABC is aware of three Barclay Finance customers on Centrelink benefits who stand to lose their homes after failing to pay back loans in time.

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As part of its contracts with these customers, Barclay Finance has taken out a mortgage on their property.

The Soewardie family

Robert and Carol Soewardie face losing everything. ( ABC News: Kyle Harley )

Carol and Robert Soewardie worked for 45 years as contract cleaners and now face losing everything.

Their son James has a mild intellectual disability.

Last year they helped him purchase a motel in country Victoria with $340,000 he inherited from his grandmother.

The family put the title in James' name as his artist father, Robert, is terminally ill.

"It was better that way, to put it in his name and give him some responsibility," Mr Soewardie said.

Carol Soewardie and her husband Robert helped their son to purchase a motel. ( ABC News: Kyle Harley )

Without his parents' knowledge, James Soewardie took out a $60,000 business loan with Barclay Finance.

Although there's no indication Barclay Finance was aware of James Soewardie' s disability, loan documents show he had $28 dollars in his bank account and was on welfare benefits.

Carol Soewardie said the motel was barely breaking even at the time.

"He would have to pay $571 a week [in interest]. And if he defaulted that went up to $1,430 a week," Mrs Soewardie said.

James's parents only discovered the loan existed when their son defaulted on it and left the country.

"That whole contract is designed to take his house, his life away," Mr Soewardie said.

"You read the whole lot, it's just a trap, an out and out trap. It's designed for people of lesser intellect."

With interest, James Soewardie now owes more than $130,000. ( Facebook )

Barclay Finance has a mortgage on the Motel and the adjoining home where the Soewardies live.

An email from the company's lawyers, Elliott May, says that with interest, James Soewardie now owes more than $130,000.

An offer from the family to pay back $50,000 and set up a payment plan was rejected.

The email reads: "… our client will be taking all steps available to it to take possession of the property".

Concerns of 'unconscionable conduct': Consumer groups

"The harm these products have done that we've seen is quite extraordinary," Consumer Action Law Centre's (CALC) Director of Legal Practice Amanda Storey said.

Ms Storey said CALC had received numerous complaints about Barclay Finance, mostly from vulnerable, low-income people.

Because Barclay Finance offers "business" loans, customers do not have the same standard consumer protections they would have under a personal loan.

Consumer groups are also not funded to help them.

"It is a real concern that these sorts of lenders are not being properly scrutinised," Ms Storey said.

"Loans that are set up to fail, in the sense that on the documents we've seen there is no possibility of them being repaid, I think that raises real concern that is unconscionable conduct which means morally tainted and very unfair," she said.

'They didn't look into the situation'

Paul Cotton fell behind in payments after being diagnosed with throat cancer. ( ABC News: Kyle Harley )

55-year-old builder Paul Cotton lives in the isolated farming town of Parilla, in South Australia.

He took out a $5,000 loan with Barclay Finance in 2014 to help pay for he and his partner to move to another town and find work.

"We had no money, we were living on Newstart [welfare benefits] and we couldn't get any work here," Mr Cotton said.

But Mr Cotton was diagnosed with throat cancer shortly after, and fell behind in payments.

"They [Barclay Finance] didn't look into the situation … to see if I was capable of paying the money back. And really we weren't in a position to pay that money back," he said.

Mr Cotton said he has paid back about $6,500 in interest to Barclay Finance, in $150 instalments each fortnight.

But he still owes $6,300.

"I'm putting money into someone else's pocket out of my Newstart allowance," he said.

Mr Cotton acknowledges he used the money to survive, not for business purposes.

That's true of other Barclay customers the ABC has spoken to.

Barclay Finance has placed a caveat on Mr Cotton's Parilla property, that he bought fifteen years ago.

The ABC understands company watchdog ASIC is now investigating.

"The issues being raised in relation to Barclay Finance are very concerning and ASIC is closely examining Barclay's operations to see whether they are complying with their obligations," ASIC said in a statement to the ABC.

ASIC encourages anyone with further information on this matter to get in touch with as soon as possible.

Barclay Finance

Barclay Finance's registered place of business is a Chinese restaurant in the Sydney suburb of Hurstville.

Barclay Finance declined to respond to the ABC's questions.

On customer documents, Barclay refers to the Commonwealth Bank and Westpac as "partners".

In a statement to the ABC a Westpac spokeswoman said: "Westpac is not a partner of this business and we do not fund its lending capability."

A Commonwealth Bank spokeswoman said: "Barclay Finance is not a partner or agent of Commonwealth Bank and does not represent the bank."

When asked if the Commonwealth Bank lent money to Barclay Finance, a spokeswoman declined to answer but said, "Where a business may provide its transaction banking details to a customer for payment, this does not necessarily mean they have any other business services with the bank such as lending facilities".