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The Australian Securities and Investments Commission (ASIC) commenced civil penalty proceedings against Money3 on 17 May 2023 and alleged the car financer entered into five loans with borrowers between May 2019 and February 2021, who were largely or solely reliant on Centrelink payments.
The Federal Court ruled that the lender did not make reasonable inquiries into verifying borrowers’ living expenses. Issues were flagged from numerous complaints to ASIC.
While Money3 was found to have made these breaches, the court rejected allegations that the lender failed to assess whether the loan contracts were unsuitable for borrowers, entered them into unsuitable loans, and failed to take reasonable steps to ensure its representatives complied with credit legislation or that its representatives were not adequately trained and competent.
ASIC said that Money3 was using fake, made-up numbers for customers’ living expenses. This would make a loan look affordable when it really wasn’t, leading to people getting unsuitable loans.
The judge ruled that ASIC failed to prove its case. The court said ASIC didn’t successfully show that Money3’s numbers were arbitrary and also didn’t prove that lenders must use a standard benchmark, like the Household Expenditure Measure (HEM).
ASIC chair Joe Longo said the regulator was concerned vulnerable consumers were entering into unsuitable loans after receiving the complaints.
He reinforced that while Money3 wasn’t guilty of all the allegations made by ASIC, it’s important to follow up on complaints.
“Responsible lending laws exist to ensure that credit providers do not enter consumers into loans that will cause them detriment in the long run,” said Longo.
“These laws are an important part of Australia’s consumer protection framework. Even though we may not ultimately be successful in every case we run, it is important ASIC take action to enforce the law where it is concerned a breach has occurred.”
