Lenders penalised $6m for misconduct: ASIC

Membo Finance Pty Ltd (Membo) and its sole credit representative, Richmond Group Financial Services Pty Ltd (RGFS), trading as ClearLoans, were found to have breached the National Consumer Credit Protection Act (the Credit Act) after the Federal Court found both Membo and RGFS failed to “act efficiently, honestly, and fairly” when dealing with debtors in financial hardship.

According to the Australian Securities and Investment Commission (ASIC), Membo/RGFS then commenced court proceedings to enforce credit contracts in a state other than where the borrower or guarantor lived.

As a credit business trading as ClearLoans, Membo and RGFS provided loans between $3,000 and $15,000 on a 12- to 60-month term with a fixed interest rate of 43 per cent per annum with all loans secured by a personal guarantee, usually through a friend or relative of the borrower.

ClearLoans would then attempt to collect the debt from the guarantor should the borrower default on their loan.

It was found that between 15 December 2017 and 16 December 2020, Membo and/or RGFS failed to:

• Provide written decisions and reasons to borrowers who applied for their credit contracts to be varied due to financial hardship, including because of a change in the borrower’s circumstance
  
  
• Consider hardship notices provided by borrowers before making inquiries of their guarantors to pay off debts
  
  
• Issue notices warning borrowers/guarantors of a direct debit default on the first occasion the default occurred
  
  
• Ensure Membo’s representatives were sufficiently trained, especially in regard to hardship applications 
  
  
• Take reasonable steps to ensure Membo’s representative complied with credit laws

ASIC deputy chair Sarah Court said the regulator took this matter to court during the peak of the pandemic, during a time where many consumers were experiencing financial hardship.

“This was a credit business that we believed was not fairly assessing hardship requests as required by law, and in many cases was making it more difficult for consumers to get back on track by failing to notify them of direct debit defaults,” Ms Court concluded.

“Credit providers must comply with their obligations to ensure financial hardship requests are properly dealt with, so consumers don’t fall further into debt.”

Furthermore, the Federal Court made orders for the lenders to discontinue a number of enforcement proceedings against borrowers and guarantors.

Both Membo and RFGS admitted to the misconducts and have agreed with the injunctions and to pay the penalties and ASIC’s costs.

[RELATED: Fintech lender hit with 2 infringement notices: ASIC]

Adrian Suljanovic is a journalist at Broker Daily with more than two years experience reporting on all facets of the third party distribution channel.

Adrian has written for a range of business and finance titles including IFA, Investor Daily and Lawyer’s Weekly before joining the mortgages team in 2022.

He graduated from the University of Wollongong in 2021 gaining a Bachelor of Communication & Media with a major in Digital & Social Media.

E-mail Adrian at: This email address is being protected from spambots. You need JavaScript enabled to view it.