A review conducted by the Consumer Action Law Centre has found that some online lenders providing ’payday loans’ are reluctant to embrace the spirit of new regulations intended to provide consumers with sufficient warnings about the hazards of these loans.
‘Regulations are very specific about website warnings, dictating the specific wording to be displayed on a website, as well as the text size, font size, and placement of the warning information. Despite the requirements, our experience in reviewing websites found that we were not drawn to some warnings—lessening the impact of these important legislative protections,’ said Gerard Brody, CEO of Consumer Action.
Consumer Action is concerned at the results from the review, and urges the Government to resist any attempt to wind back regulations that protect the most vulnerable consumers who are the target market for payday lenders.
‘The activities of online payday lenders are under intense scrutiny in many jurisdictions’ continued Mr Brody. ‘Local councils in the UK are now blocking public access to websites to protect consumers from falling victim to these high-cost loans. At least one US state which has banned online payday lenders from trading in their state is asking banks to prevent lenders from accessing consumer bank accounts to repay allegedly illegal loans. Overseas regulators are clearly on high alert as this form of borrowing becomes more readily available online.’
The review, What warning? Observations about mandated warnings on payday lender websites, identified a number of areas of concern with some websites, including:
- Warnings not being displayed in a way that would attract consumer attention;
- Seemingly incorrect or incomplete warning text; and
- Not requiring consumers to acknowledge warnings before accessing a loan application.
This suggests an important role for the regulator to ensure lenders comply in good spirit.
‘Payday lending websites regularly change. The Australian Securities and Investments Commission (ASIC) needs to be vigilant in checking lender websites are compliant, and act swiftly where warnings are missing or inconsistent with regulatory requirements’, continued Mr Brody.
‘Among its regulatory powers, ASIC has the power to suspend or cancel credit licences for non-compliance with credit legislation. Taking enforcement action would send a clear message to the industry that a credit licence is a privilege not a right, and that abiding by the law is a basic requirement for all licence holders’, he concluded.
For further information visit Consumer Action Law Centre.