ASIC warns payday lenders may be breaching consumer protection laws

The Australian Securities and Investments Commission (ASIC) has released Report 805 Falling short: Compliance with the small amount credit contract obligations (REP 805) which sets out ASIC’s observations from its recent review into lenders, following changes to laws governing small amount credit contracts in 2022 and 2023 under the Financial Service Reform Act 2022 (FSR Act). 

Based on its review of changes in the sector, ASIC is concerned that some small and medium amount credit contract providers may be falling short of their obligations by: 

• Entering into unsuitable contracts with consumers, or 

• Failing to identify an appropriate target market and distribute their products accordingly. 

ASIC also identified: 

• A reduction in the number of small amount credit contracts provided 

• An increase in the number of medium amount credit contracts provided, and 

• An increase in the total number of missed repayments for medium amount credit contracts, but a decline in the total number of missed repayments for small amount credit contracts.