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Wednesday 23 March 2016

16-089MR Payday lender Nimble to refund $1.5 million following ASIC probe

Following a significant ASIC investigation, payday lender Nimble Australia Pty Ltd (Nimble) will refund over 7,000 customers more than $1.5 million after ASIC had concerns that Nimble was failing to meet its responsible lending obligations.

ASIC identified significant deficiencies in Nimble's compliance with the responsible lending laws when providing loans of short duration to consumers.

ASIC's probe found that:

Nimble had not properly assessed the financial circumstances of many consumers before providing them with loans. Nimble relied on algorithms which did not properly take consumers' financial information into account.

Nimble failed to consistently recognise where consumers had obtained repeat loans from payday lenders within a short period of time. Even where repeat loans were properly identified, Nimble did not take sufficient or appropriate steps as required by law before providing a loan to the consumer.

Nimble failed to make proper inquiries of consumers' requirements and objectives, and inquiries that were made were of a general nature and resulted in not enough information for Nimble to fully understand the consumer's needs.

'This is a significant outcome for financially vulnerable consumers,' said ASIC Deputy Chair Peter Kell.

'This outcome is a further example of ASIC's strong focus on the payday lending sector. This remains a high priority area for ASIC, and we expect the industry to continue to lift its game.'

As part of its undertaking to ASIC, Nimble is required to:

pay more than 7,000 consumers in excess of $1.5 million through a consumer remediation program overseen by Deloitte Touche Tohmatsu;

make a $50,000 contribution to Financial Counselling Australia; and

engage an independent external compliance consultant to review their current business operations and compliance with the consumer credit regime and report back to ASIC.

Consumers should expect to be contacted shortly as the remediation process must be completed within six months.

ASIC encourages all participants in the consumer credit industry to take note. All credit licensees need to consider the individual situation of each borrower. Further, automated processes need to be rigorously and continually tested to ensure that the licensee who uses them is complying with their responsible lending obligations.

Consumers who believe that they entered into an unsuitable loan with Nimble are encouraged to contact Nimble in the first instance. If they are not satisfied by Nimble's response, consumers can lodge a complaint with the Credit and Investments Ombudsman. ASIC's MoneySmart website has useful guidance on how payday loans work and alternative credit options.

ASIC acknowledges that Nimble has made significant changes to their system and processes since the ASIC investigation commenced.

Download the Enforceable Undertaking

Background

Nimble (previously Cash Doctors) has held an Australian credit licence (number 386010) since 8 December 2010.

The National Credit Act requires credit licensees to meet responsible lending obligations. Before a credit licensee suggests, assists with, or enters into a new credit contract, the credit licensee must:

make reasonable inquiries of the consumer about their requirements and objectives in relation to the credit contract;

make reasonable inquiries of the consumer about their financial situation;

take reasonable steps to verify the consumer’s financial situation;

based upon these inquiries, assess whether the credit product is unsuitable for the consumer and only proceed if the credit product is not unsuitable.

Further protections for consumers of payday loans were introduced in 2013 which presume that a small amount loan will be unsuitable if either:

the consumer is in default under another small amount loan; or

the consumer has had two or more other small amount loans in the last 90 days.

ASIC’s responsible lending work

ASIC has had a particular focus on the responsible lending laws across the credit industry, not just in payday lending, as these are key consumer protection provisions. Some outcomes are listed below:

BMW Finance paid $391,000 for breaching responsible lending and repossession laws (refer: 16-019MR).

Westpac paid $1 million following ASIC's concerns about credit card limit increase practices (refer: 16-009MR).

Bank of Queensland Limited improved its lending practices following ASIC's concerns about the way it assessed applications for home loans (refer: 15-125MR).

The Federal Court of Australia awarded $18.975 million in civil penalties against The Cash Store Pty Ltd and Assistive Finance Australia Pty Ltd for their failure to comply with responsible lending obligations (refer: 15-032MR).

Wide Bay Australia Ltd (now Auswide Bank Ltd) made changes to their responsible lending policy as a result of ASIC's intervention (refer: 15-013MR).

ASIC issued 36 infringement notices to BMW Finance totalling $306,000 after finding that it breached consumer protection provisions relating to the repossession of motor vehicles (refer 15-037MR).

Abaz Pty Ltd paid an infringement notice for failing to obtain and consider bank statements as required by the legislation (refer: 14-313MR).

ASIC has provided two submissions on the regulation of payday lending and consumer leases to the Government's independent review of the small amount credit laws (refer: 15-319MR).

ASIC's Regulatory Guide 209 Credit licensing: Responsible lending conduct was updated in November 2014, and reflects the Federal Court decision in ASIC v The Cash Store (in liquidation) [2014] FCA 926.