Cash Stop Financial Services Pty Ltd, a payday lender with branches throughout Australia, will refund a total of $14,000 to more than 650 consumers following an ASIC investigation.
ASIC’s investigation found that Cash Stop retained part of the loan funds it should have paid directly to consumers by charging a subscription fee for a Membership Rewards Program. Cash Stop breached new payday lending laws by charging such a fee.
Between 1 July 2013 and 7 August 2013, Cash Stop entered into 697 payday loans where it withheld $20 from each consumer’s loan funds to pay for the Membership Program. This amounted to the payday lender retaining approximately $14,000 from consumers’ loans.
ASIC has accepted an enforceable undertaking (EU) which requires Cash Stop to:
- refund the membership fee to each of the affected consumers
- send a letter to each consumer who paid the membership fee explaining the reasons why the membership fee is being refunded, and
- honour the terms of the membership for the full period for which the consumer paid, notwithstanding that the membership fee has been refunded to the consumer.
Deputy Chairman Peter Kell said, ‘Consumers taking out a small amount loan are often relying on the money to pay for an unexpected expense and cannot afford to be short-changed.
‘ASIC will continue to hold payday lenders accountable and ensure financially vulnerable consumers are not paying more for these types of loans than the law allows’.