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The Australian Securities and Investments Commission (ASIC) announced the cancellation (9 October) of the Australian credit licence (ACL) of personal lender Ferratum Australia Pty Ltd (Ferratum) following a payment of compensation by the Compensation Scheme of Last Resort (CSLR).
This is not ASIC’s first regulatory action against Ferratum, which is currently in liquidation.
ASIC first commenced proceedings against Ferratum on 1 November 2022 and it was found almost a year later by the court that between March 2019 and 2021 that the lender had breached consumer credit protection laws by charging prohibited fees and overcharging customers in small amount credit contracts.
In April 2024, the Australian Financial Complaints Authority (AFCA) made a determination against Ferratum, which the lender failed to pay, and on 18 September 2024, the CSLR paid $1,297 to a person for the AFCA determination and notified ASIC.
This has resulted in ASIC cancelling Ferratum’s credit licence, with the cancellation not being subject to discretion or merits review.
This followed ASIC cancelling the ACLs of both Ultimate Credit Management Pty Ltd (Ultimate Credit) and Worry Free Finance Pty Ltd (Worry Free) also following payments of compensation by the CSLR.
AFCA had made determinations against both lenders that were followed by CSLR payments to a person in the determination ($500 for Ultimate Credit and $22,001 for Worry Free).
First established in 2023, and commencing in April 2024, the CSLR can pay up to $150,000 in compensation to consumers who have an unpaid determination from AFCA relating to authorised personal financial credit advice, credit intermediation, securities dealing or credit provision, and where other eligibility criteria are met.
First CSLR payments involved mortgage broking
On 11 June 2024, one of the first of four payments made to consumers under CSLR were to a couple in Queensland who were given inappropriate advice by a mortgage broker.
The couple was given $50,000 after it was found that the broker had “taken advantage” of the couple by falsifying their projected income and reportedly took place before best interests duty was enacted in 2021.
“We were misled by a mortgage broker who we trusted as a friend. Believing he was helping us, we soon realised he was profiting at our expense,” the couple told the body.
“Lacking industry knowledge, we were vulnerable to his deceit and conflict of interest. He got us a mortgage loan by falsifying projected income to secure a loan we couldn’t afford.”
The other three payments ranged from $17,00–$150,000 for a variety of inappropriate financial advice from financial advisers and planners.
Upon the execution of these first payments, CSLR CEO David Berry said: “While the financial services industry works toward the betterment of their clients it’s unfortunate that there are a small few who take advantage of the trust bestowed on them.
“Ensuring some basic consumer protections works to lift trust in the financial services industry and the professions that support it.
“This crucial safety net for victims of financial services misconduct is now in place and those who have experienced financial loss through no fault of their own are being compensated.
“This really is a compensation scheme of last resort – these first four claimants had exhausted all other avenues and waited up to five years for a resolution.
“The CSLR claims team has been moved by the joy expressed by the scheme’s first claimants, some of whom were in quite desperate financial straits.”
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