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20/12/2024·2 mins to read
ASIC takes action against Swoosh for alleged breaches of its responsible lending obligations
The Australian Securities and Investment Commission (ASIC) has commenced legal proceedings against Ausfinancial Pty Ltd, trading as Swoosh Finance (Swoosh) alleging that it breached its responsible lending obligations by providing credit to borrowers who were experiencing financial difficulties and could not afford to repay the loans without suffering financial hardship.
Key takeaways
- Enforcement of Australia’s consumer credit laws has been an enforcement priority for ASIC for the last three years and it frequently takes enforcement action in this space, obtaining refunds for affected borrowers and pecuniary penalties against offending creditors.
- Consumer credit laws in Australia are similar to those in New Zealand. Both seek to protect borrowers by imposing various obligations on lenders, including the requirement to assess the suitability and affordability of a loan before it is given to the borrower.
- To date New Zealand’s credit laws have been monitored and enforced by the Commerce Commission, but the regulatory responsibility is expected to transfer to the Financial Markets Authority (FMA) in 2025.
Swoosh
Swoosh provides consumers with medium credit contracts of between $2000 to $5000, which are often secured by a vehicle.
ASIC alleges that between 2019 and 2014, Swoosh breached its responsible lending obligations in contracts with 11 consumers by:
- failing to assess the suitability of the loans and ignoring indicators that consumers would be unable to make repayments or meet their obligations without experiencing substantial financial hardship; and
- failing to make reasonable inquiries about, and verify, the borrower’s financial situation, requirements and objectives.
In keeping with its recent enforcement priorities,[1] ASIC has been particularly active in the consumer credit space in last few years and has recently announced other proceedings against Oak Capital (alleging unconscionable conduct to circumvent consumer credit laws) and Diamond Wheels and Keo Automotive for providing unlicensed car loans to consumers.[2]
New Zealand
There is also plenty of activity in the New Zealand consumer credit space with the Commerce Commission taking civil proceedings against three car finance lenders this year.[3]
Given the recent and upcoming changes to the Credit Contracts and Consumer Finance Act (CCCFA), including the change of regulator to the FMA, we anticipate plenty of activity in this space next year - including enforcement proceedings by the Commerce Commission and/or FMA for breaches of the CCCFA that exploit vulnerable borrowers.
Get in touch
If you have any questions about your company’s compliance with the New Zealand’s consumer credit laws or any of the ongoing changes in this space, please get in touch with one of our contacts.
