ASIC has taken the payday lending sector to task over its compliance with the NCCP.
An ASIC review has claimed payday lenders need to improve their compliance with key consumer protection laws. The review found that, while some compliance rules were working, payday lenders were "falling short" of meeting new obligations introduced in a round of small lending reforms in 2013.
"The payday lending sector is on notice to improve its practices, or further ennforcement action is inevitable," ASIC deputy chairman Peter Kell
The review of 288 consumer files from 13 payday lenders responsible for more than 75% of the payday loans made in Australia found compliance risks around loan suitability. It also identified concerns where lenders set loan terms for 12 months or more - charging consumers more fees - in instances where consumers had requested shorter loan terms and repaid the loan within the shorter time period.
ASIC said the report also found "systemic weaknesses" in documentation and record keeping in the industry.
"ASIC has a strong focus on the payday lending sector as its customers include some of the most financially vulnerable members of the community," Kell said. "ASIC will use its powers to reduce the risk of payday lenders providing unsuitable loans and to reduce the risk that financially vulnerable consumers get caught in a debt spiral, where new loans are effectively used to pay back old loans."