PAYDAY LENDERS ON THE NOSE

SOUTHPORT-BASED payday lenders are in the corporate regulator’s crosshairs for loans charging 1000 per cent interest to low-income customers.

ASIC yesterday announced it has released a consultation paper proposing the first use of its new product intervention power where it is seeking to address what it calls “significant consumer detriment in the short-term credit industry”. Cigno Pty Ltd and Gold-Silver Standard Finance Pty Ltd are the first targets.

SOUTHPORT-BASED payday lenders are in the corporate regulator’s crosshairs for loans charging close to 1000 per cent interest to low-income customers.

ASIC on Tuesday announced it had released a consultation paper proposing the first use of its new product intervention power, in which it is seeking to address what it calls “significant consumer detriment in the short-term credit industry”.

New powers, granted by the Federal Government in April, require ASIC to consult with affected and interested parties before intervening.

Cigno Pty Ltd and Gold-Silver Standard Finance Pty Ltd are the first targets identified by ASIC.

Cigno’s sole director is Mark Swanepoel, while the latter company counts Jan Swanepoel as the only director and shareholder. Both companies share an address on level one of 34a Nerang St.

A case study from ASIC in its consultation paper describes the situation of a Cigno client who borrowed $120. The total amount to be repaid was $263.60 by four fortnightly payments of about $66.

ASIC said the client could not afford the repayments and “immediately defaulted”.

She was charged dishonour fees and weekly account-keeping fees, resulting in her being liable to repay $1189 – 990 per cent more than she borrowed.

The Bulletin visited Cigno’s offices, where an employee said a representative would be in touch.

The Bulletin also called the mobile number listed on Cigno’s website but it was switched off. Emails and calls to the business landline were not returned.

Cigno claims on its website that it is not the lender but instead acts as an agent for GoldSilver Standard Finance, which loans the money.

ASIC Commissioner Sean Hughes said “significant” harm had been done to vulnerable people through the use of the short-term lending model.

“Consumers and their representatives have brought many instances of the impacts of this type of lending model to us,” he said.

“Given we only recently received this additional power, then it is both timely and vital that we consult on our use of this tool to protect consumers.

“Before we exercise our powers, we must consult with affected and interested parties.

“This is an opportunity for us to receive comments and further information ... before we make a decision.”

ASIC is seeking public submissions by July 30.

The regulator said it expected to make a decision on which course to take by August.

Options flagged in its proposal include the use of the product intervention power to prohibit specific short-term lending models – ASIC’s preferred option, encouraging the use of alternative products or actions through warning messages and no change.

Payday lenders are not subject to the National Credit Code and National Credit Act if they meet certain conditions. They include extending credit for less than 62 days and that the maximum amount of credit fees and charges imposed does not exceed 5 per cent of the total amount of credit.

This means lenders such as Cigno and Gold-Silver Standard Finance can operate without a credit licence.