Following proceedings launched by ASIC against payday lender,
The Federal Court ruled that TCS and AFA failed to comply with their responsible lending obligations in relation to their customers, the majority of whom were on low incomes or in receipt of Centrelink benefits. Further, the court held that TCS acted unconscionably in selling consumer credit insurance in relation to these loans when it was unlikely that that insurance could ever provide any benefit to their customers.
The decision of the Federal Court makes it clear that to enable a meaningful assessment to be made as to whether a loan is suitable, credit licensees must inquire about the customer's current income and living expenses along with further information depending on the circumstances of the particular consumer involved.
The Federal Court found there was a systemic failure on the part of TCS and AFA to comply with their responsible lending obligations.
TCS was also criticised for its role in actively encouraging staff to sell consumer credit insurance that was almost invariably inappropriate to offer to payday lending customers and which was useless for unemployed customers a fact that must have been known to TCS .
'ASIC also welcomes the court's findings about unconscionable conduct by TCS, which occurred on a systemic scale, in the sale of inappropriate add-on insurance products. In more than 182,000 consumer credit insurance policies sold by TCS, there were only 43 consumers who received a payout.
'This confirms that a finding of unconscionable conduct and associated remedies are available for this sort of systemic mis-selling and helps clear the way for ASIC to take further actions of this type in relation to inappropriate add-on insurance'.
The maximum penalty for a corporation for breaching responsible lending and credit guide laws is
The matter will be listed for a further hearing in relation to the civil penalties payable by TCS and AFA after
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