ASIC has also issued two infringement notices to Fair Loans with a total penalty of $22,000 for related breaches of the National Consumer Credit Protection Act 2009.
Fair Loans currently operates on a not-for-profit basis to provide credit to financially disadvantaged consumers as an alternative to high-cost payday lenders.
An ASIC investigation into Fair Loans identified concerns that the interest rate being disclosed to consumers in the advertising and loan contracts was less than the actual rate charged.
Fair Loans disclosed an annual percentage rate of 15.95% or 19.95% when the actual rate of interest charged was 28.25% or 35% respectively. This led to consumers being overcharged interest.
‘The cost of credit is a key factor for consumers when shopping around for a loan and the law requires that representations about cost both in advertising and loan contracts are accurate.
ASIC will not accept overcharging, and where necessary will take action to ensure consumers are not out of pocket,’ ASIC Deputy Chairman Peter Kell said.
ASIC acknowledges Fair Loans has already repaid the overcharged interest to a significant number of the affected consumers and has entered into a repayment plan to pay the infringement notices.