D-day for payday lenders after ASIC wins ‘landmark case’ against the Cash Store

THE corporate cops have won a “landmark case” against a payday lender that sold 182,000 virtually useless insurance policies which caught out many struggling Aussies.

The Australian Securities & Investments Commission said said the Cash Store sold more than 182,000 consumer credit insurance policies — but only 43 consumers received payouts because the policies were so “inappropriate”. Picture: Supplied.

THE corporate cops have won a “landmark case” against a payday lender which stung struggling Australians.

The Federal Court found the Cash Store breached consumer credit laws and engaged in unconscionable conduct by selling virtually useless insurance.

CONSUMER ALERT: the story that preceded the ASIC court action

The Australian Securities and Investments Commission, which brought the proceedings in September last year following revelations by News Corp Australia, said the Cash Store sold more than 182,000 consumer credit insurance policies — but only 43 consumers received payouts because the policies were so “inappropriate”.

The policies covered them if they could not make repayments, due to losing a job, however many were not employed in the first place.

The Australian Securities & Investments Commission said said the Cash Store sold more than 182,000 consumer credit insurance policies — but only 43 consumers received payouts because the policies were so “inappropriate”. Picture: Supplied.

The Cash Store had 80 branches across Australia at its peak and was writing about 10,000 loans per month of up to $2200 each, making it the second-largest player in Australia’s $800 million a year short-term lending sector.

“This is a landmark case for the consumer credit regime,” said ASIC deputy chairman Peter Kell. “It is essential reading for all credit licensees as it sets out how the responsible lending obligations work in practice.

“ASIC also welcomes the court’s findings about unconscionable conduct by the Cash Store, which occurred on a systemic scale, in the sale of inappropriate add-on insurance products.”

The Federal Court found the Cash Store breached seven separate provisions of the National Consumer Credit Protection Act. The maximum penalty for a single breach is $1.1 million. The penalty to be imposed on the Cash Store will be determined later this year.

The Cash Store business was purchased by competitor Money3 last year.

Comment has been sought from Money3.

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Originally published as D-day for payday lenders after ASIC wins ‘landmark case’ against the Cash Store