Ausfinancial Pty Ltd, trading as Swoosh Finance (Swoosh), allegedly breached its responsible lending obligations when providing credit contracts to 11 consumers, according to civil penalty proceedings filed by ASIC in the Federal Court.
ASIC also alleges that Swoosh breached its design and distribution obligations by failing to review its target market determinations and continuing to provide credit contracts to consumers, despite increasing complaints received directly from customers or via the Australian Financial Complaints Authority.
ASIC Deputy Chair Sarah Court said, 'ASIC alleges Swoosh failed to properly inquire about, and verify, the consumers' financial situations before offering them a credit contract.
'Many of these borrowers were in challenging socio-economic circumstances and were experiencing financial difficulties. Some of them had frequently used early wage advance services, had multiple existing loans and buy-now/pay-later commitments, and many showed clear signs of financial distress, such as direct debit dishonours, negative bank balances or credit defaults.
'In certain cases, ASIC alleges loans were used to consolidate existing debts or to pay for basic household items, such as groceries and car service or repairs. Borrowers typically used their cars as security for the loans, which were generally between $2,000 and $3,000, and were charged upfront fees of more than $400 and an annual interest rate of 47%. Borrowers who defaulted on their repayments were charged further fees.
'ASIC will continue to take action against entities that do not comply with their design and distribution obligations. Publishing a target market distribution is not an isolated task: it must be reviewed and updated where there are circumstances indicating that the target market is no longer appropriate.'
ASIC alleges between October 2019 and October 2024, Swoosh entered loans with 11 consumers in circumstances where it:
- failed to assess the loans as being unsuitable where there were indicators consumers would be unable to make repayments or meet their obligations without experiencing substantial financial hardship, and
- failed to make reasonable inquiries about, and verify, the borrower's financial situation, requirements and objectives.
Today's announcement follows ASIC's recent Federal Court proceedings against Oak Capital (24-243MR) alleging unconscionable conduct designed to avoid the National Credit Code in October and its action against Diamond Wheels, Keo Automotive and a former director for providing unlicensed car loans to consumers (24-209MR) in September this year.
Background
Swoosh is a credit licensee providing consumers with medium amount credit contracts for $2,0000 to $5,000 and secured by a vehicle, trailer or boat.
ASIC alleges Swoosh Finance contravened:
- ss 994C(4) of the Corporations Act 2001, being breaches of the design and distribution obligations, and
- ss 128, 130(1), 131(1) and 133(1) of the National Consumer Credit Protection Act 2009, being breaches of the responsible lending obligations.
ASIC's Moneysmart website has information for consumers on what to do if they need to access money quickly. Consumers can also speak to a financial counsellor for free advice about their situation and options available.
