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13-190MR Lender to refund consumers and pay financial penalty following interest rate errors
Fair Loans Foundation Pty Ltd has entered into an enforceable undertaking (EU) with ASIC under which it will refund approximately 864 consumers around $157,000 in overcharged interest and appoint an independent consultant to ensure it complies with the credit laws in the future.
ASIC has also issued two infringement notices to Fair Loans with a total penalty of $22,000 for related breaches of the National Consumer Credit Protection Act 2009 (National Credit Act).
Fair Loans currently operates on a not-for-profit basis to provide credit to financially disadvantaged consumers as an alternative to high-cost payday lenders.
An ASIC investigation into Fair Loans identified concerns that the interest rate being disclosed to consumers in the advertising and loan contracts was less than the actual rate charged. Fair Loans disclosed an annual percentage rate of 15.95% or 19.95% when the actual rate of interest charged was 28.25% or 35% respectively. This led to consumers being overcharged interest.
‘The cost of credit is a key factor for consumers when shopping around for a loan, and the law requires that representations about cost both in advertising and loan contracts, are accurate. ASIC will not accept overcharging, and where necessary will take action to ensure consumers are not out of pocket,’ ASIC Deputy Chairman Peter Kell said.
ASIC has accepted the EU from Fair Loans in resolution of its concerns over the miscalculation and disclosure of interest.
ASIC acknowledges Fair Loans has already repaid the overcharged interest to a significant number of the affected consumers and has entered into a repayment plan to pay the infringement notices.
Fair Loans has held an Australian Credit Licence, number 378968, since 25 October 2010.
Payment of an infringement notice is not an admission of a contravention of the National Credit Act. ASIC can issue an infringement notice where it has reasonable grounds to believe a person has contravened certain consumer protection laws. These contraventions may relate to:
lodging compliance certificates
providing quotes, credit guides, and credit proposal disclosure documents
offering credit card limit increases without the consumer's consent, and
the order of application of credit card repayments.
In October 2013 Fair Loans made the final instalment on their repayment plan.