Pay-day and other short-term lenders are the second credit segment to be singled out for not fully meeting responsible lending requirements, and have been warned against "deliberate breaches".
A review of the sector's responsible lending credentials has found that while lenders had introduced new procedures to meet requirements, they were not doing so consistently.
"Probems included instances of not recording the actual purpose of a loan, undertaking very limited verification of a consumer’s financial circumstances, and not taking steps to clarify conflicting information in loan applications," ASIC's report released yesterday stated.
Files from 19 micro lenders yielded examples where expenses listed in the application appeared to be understated relative to very basic living costs, and where a consumer's stated expenses together with the required repayments on the loan exceeded the consumers stated income.
Other examples earning ASIC's ire were when bank statements provided with the loan application showed the consumer’s account was overdrawn by the end of each pay cycle.
ASIC Commissioner Peter Kell said that while micro lenders are "clearly adapting" to the new regime, there is "still work to be done".
"Our key message for industry is that you now know what the requirements are and how they work - it’s time to get consistent in your business operations," Kell said. ‘We’ll work with lenders who are making genuine efforts to comply with the law but will take a tougher approach where we encounter deliberate breaches, serious misconduct or significant risk of consumer detriment."
Kell said that because these lenders generally deal with consumers who have fewer financial resources available, it is "especially important" that they lend responsibly.
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