Payday lender’s advertising potentially misleading or in breach of consumer credit laws

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A Money3 advertisement boasting that no loan application will be refused has raised the ire of the Consumer Action Law Centre which has asked the Australian Securities and Investment Commission (ASIC) to investigate. Consumer Action says the advert for auto finance, which reads “we say yes! no application refused” , suggests Money3 is either ignoring its legal obligation to assess each customer’s financial situation before offering a loan, or that it is potentially misleading customers to get them through the door.

Gerard Brody, Director of Policy at Consumer Action, said that ‘under Australian laws lenders are required to make reasonable enquiries about each customer’s financial circumstances and to ensure repayments wouldn’t cause them substantial hardship before lending them money. Certainly a sign stating that no application will be refused could be read by a customer to suggest that enquiries aren’t being made—if they are, then this ad is potentially misleading.’

‘If the advertising is correct, the idea that Money3 will loan to anyone, regardless of their financial circumstances or existing commitments is simply frightening and, we believe, a breach of the law,’ said Mr Brody.

The complaint about Money3 follows a similar complaint made in relation to another payday lender, The Cash Store, in December[1] and recent action taken by ASIC in relation to another car finance provider who claimed to provide ‘guaranteed finance’.[2]

Mr Brody said this sort of advertising underscores the fact that current responsible lending laws are insufficient to protect borrowers. ‘In the current debate about the future of the payday lending industry, Money3 has claimed that it lends responsibly and only to those who can afford the repayments, but its promotional material appears to contradict these claims and raises serious questions about either its lending practices or its compliance with obligations to avoid misleading and deceptive conduct.

‘Many customers who go to small amount lenders, whether it be for a car loan or a payday loan, are living off very low incomes or are reliant on Centrelink payments. It’s crucial that these people have their financial situation properly assessed or they’ll find themselves with unmanageable debt,’ said Mr Brody.