ASIC has announced it has commenced civil penalty proceedings in the Federal Court against car finance provider Money3 Loans Pty Ltd (Money3) alleging breaches of its responsible lending obligations when providing finance for the purchase of second-hand vehicles.

ASIC alleges that in the period between May 2019 and February 2021, Money3 failed to properly assess whether certain borrowers (including First Nations peoples) could meet their repayment obligations before entering into loan contracts for the purchase of second-hand vehicles.

ASIC says that each of these consumers, and a substantial proportion of Money3 customers, were either receiving Centrelink payments as their sole income or were on low incomes.

The total loan amount for each of the sample Credit Contracts comprised an amount of $8,000 advanced to purchase the vehicle, as well as Add-on Fees totalling around $3,000 (for an application fee, a broker fee, and extended warranty insurance). Each of the Consumers had as their objective obtaining financing for a second-hand vehicle (but not for financing any Add-on Fees).

ASIC alleges that Money3:

• Entered into unsuitable loans with certain consumers, meaning the consumer could not meet their repayments without experiencing financial hardship;
• Failed to assess those loans as unsuitable by determining that the consumers could not meet the repayments without experiencing financial hardship;
• Failed to make reasonable inquiries about, and verify, those consumers’ financial situation, requirements and objectives;
• Failed to take reasonable steps to ensure that its representatives complied with the credit legislation and were adequately trained and competent.

ASIC further alleges that when approving loans, Money3 applied arbitrary expense amounts from an internal ‘product guide’ which were not based on the consumer’s financial situation and were substantially lower than their reasonably necessary expenses.

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