ASIC sues short-term lender ClearLoans
Trading under the ClearLoans name, the company specializes in underwriting small loans between $ 3,000 and $ 15,000 over terms of 12 to 60 months. ClearLoans charged interest rates of up to 43 percent per year and all loans were secured by personal guarantees.
ASIC alleges that the conduct took place between December 15, 2017 and December 16, 2020. Violations committed after March 2019 will result in penalties while the regulator will seek warnings and injunctions for the rest.
Many alleged violations took place during the pandemic when Australia’s largest banks allowed customers to defer $ 262 billion in loans for six months without consequence for the lender.
ASIC alleges that on at least 39 occasions between March 3, 2020 and December 16, 2020, ClearLoans failed to respond to customers seeking to change their loan terms after making hardship claims.
On 10 occasions, ClearLoans has told customers that they need supporting documentation within 48 hours and on seven occasions it has told customers that if they do not receive them, the claim will lapse. ClearLoans was an online-only branchless operation in Australia.
The company is also accused of having committed serious breaches of execution and collection. By law, enforcement proceedings must not begin until 30 days after the issuance of a notice of default and the proceedings must take place in the state where the borrower resides.
ASIC alleges that Membo Finance did not issue formal notices on 112 occasions between December 15, 2017 and August 8, 2020, while alleging that Membo initiated proceedings prematurely on 60 occasions between May 18, 2019 and December 20, 2019.
ASIC also alleges that Membo attempted to pursue 278 legal proceedings in Parramatta NSW Local Court between May 11, 2018 and March 12, 2020 against 519 debtors and guarantors who were not living in NSW at the time.
Mr. Hughes of ASIC described ClearLoans’ conduct as harsh and unfair, saying it went to the very heart of the relationship of trust between borrower and lender.
“You would expect a responsible lender to have the right difficulty management processes in place. They must have proper training and they must comply strictly with the terms of the credit law, ”said Mr. Hughes.