ASIC to target predatory lending, credit practices

The corporate watchdog is preparing to crack down on financial services misconduct and predatory lending practices as rising costs increases pressure on businesses and consumers.

Australian Securities and Investments Commission commissioner Kate O’Rourke said the corporate watchdog was preparing to target dodgy credit providers and financial services.

“We’re looking at taking action against misconduct by financial services and credit providers who engage with small businesses unfairly,” she told the Council of Small Business Organisations Australia summit on Thursday.

“Such as unconscionable conduct, unfair contract terms, claims mishandling for misleading and deceptive conduct against small businesses.

“That’s one of the areas ASIC is targeting with our enforcement teams.”

The Nightly has previously revealed that calls for financial help are rising, which include calls from small to medium business owners.

Calls to Financial Counselling Australia’s national helpline jumped by 20 per cent to 129,328 in the 2022-23 financial year while calls in Victoria alone soared 25 per cent to 30,000.

Ms O’Rourke said ASIC was also targetting predatory credit and lending practices as cost of living pressures forced struggling business owners and consumers towards dodgier providers.

“The second is high cost credit and predatory lending practices that affect both consumers and small businesses,” she said.

“So I understand from yesterday and indeed this morning that cost of living pressures have led to increases in predatory lending behaviors and they can have a very damaging impact on consumers and small businesses.

“So that’s the second area we are particularly focussing on. We have enduring priorities in the enforcement space as well.”

Complaints involving financial difficulty, including disputes over hardship assistance, have jumped 25 per cent to 5396, according to the Australian Financial Complaints Authority, with a third relating to home loan repayments.

Personal insolvencies are expected to hit 12,500 this year, according to figures from the Australian Financial Security Authority, an increase from 10,000 recorded last year.

AFSA chief executive Tim Beresford said personal insolvencies, when someone is unable to pay their debts, would probably reach 15,000 next year.

“It’s [insolvencies are] rising gently,” he said.

“Last year [there were] 10,000 personal insolvencies. This year will be about 12,500 and next year we will probably get to around 15,000. The 10-year average is 23,000. It’s rising.

Mr Beresford said the average personal insolvency in Australia was about $50,000, which he said could be achieved with a credit card and a couple of bills.

“In our space, many people we touch base with are indeed extremely vulnerable Australians,” he said.

“The average personal insolvency in this country is around about $50,000. Think about it. One credit card, one personal loan and five buy-now, pay-laters and five bills.”