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Abstract:The Australian Securities and Investments Commission (ASIC) has taken legal action in the Federal Court against car finance provider Money3 Loans Pty Ltd (Money3), accusing the company of violating responsible lending obligations in relation to the financing of second-hand vehicle purchases.
The Australian Securities and Investments Commission (ASIC) has taken legal action in the Federal Court against car finance provider Money3 Loans Pty Ltd (Money3), accusing the company of violating responsible lending obligations in relation to the financing of second-hand vehicle purchases.
According to ASIC Deputy Chair Sarah Court, the regulatory body is determined to take decisive measures against credit providers who fail to consider the financial circumstances of vulnerable consumers. She emphasized that holding such entities accountable is a top priority for ASIC.
The allegations against Money3 span the period from May 2019 to February 2021, during which the company allegedly neglected to adequately assess whether certain borrowers, including First Nations peoples, possessed the means to meet their repayment obligations before entering into loan contracts for the acquisition of used vehicles. It is worth noting that a significant portion of Money3's customer base consisted of individuals reliant solely on Centrelink payments or with low incomes.
ASIC's concern lies in the inadequate evaluation of these loans to determine whether borrowers could manage repayments without experiencing financial distress. The loans primarily targeted individuals with limited incomes, exacerbating their financial hardships.
Court added, “The consumer loans we are concerned with showed the purchase price of $8,000 for a second-hand vehicle, with additional fees and warranty costs amounting to another $3,000. An $11,000 loan is a substantial sum for a consumer on a low income to repay without having been properly assessed as to whether they could afford to repay it. In some cases, the vehicle broke down, leaving the consumer with an unusable car and an unaffordable loan, compounding the detriment.”
ASIC's specific allegations against Money3 include:
Entered into unsuitable loans with certain consumers, meaning the consumer could not meet their repayments without experiencing financial hardship;
Failed to assess those loans as unsuitable by determining that the consumers could not meet the repayments without experiencing financial hardship;
Failed to make reasonable inquiries about, and verify, those consumers financial situation, requirements, and objectives;
Failed to take reasonable steps to ensure that its representatives complied with the credit legislation and were adequately trained and competent.
Furthermore, ASIC asserts that Money3 applied arbitrary expense figures from an internal “product guide” when approving loans. These figures were not based on the borrowers' actual financial situations and were substantially lower than their reasonable and necessary expenses.
The case will proceed in the Federal Court, and a hearing date will be determined by the Court in due course.
About Money3
Money3 Loans Pty Ltd (Money3) is a car finance provider based in Australia. The company offers loans specifically for the purchase of second-hand vehicles. Money3 operates in the consumer lending sector, providing financial assistance to individuals seeking to acquire cars. However, it has recently come under scrutiny for alleged breaches of responsible lending obligations, whereby it is accused of failing to adequately assess borrowers' ability to repay loans, particularly those who rely on Centrelink payments or have low incomes.
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