ASIC’s Report 264 Review of micro lenders responsible lending conduct and disclosure obligations (REP 264) has found that while the majority of micro lenders are aware of and taking steps to comply with their responsible lending obligations, ASIC identified some instances where micro lenders were at risk of not being able to demonstrate they had met their responsible lending and disclosure obligations.

Whilst “micro lenders” is not statutorily defined, in the report the term ‘micro lender’ is used for lenders who provide loans not involving real property, such as short-term loans of small amounts and payday loans.

The review involved 19 micro lenders and looked at 168 loans between 1 July and 31 December 2010. These 168 files included 19 loans offered by micro lenders over the internet and 8 loans offered for car finance. The majority of micro lenders reviewed (16 of the 19) offered loans of terms not more than 12 months, while 6 micro lenders offered credit for amounts of $1500 or less. While a small number of the lenders did offer credit card contracts or home loans, none of the files reviewed were for those credit products.

ASIC’s review found that, while micro lenders were generally able to demonstrate they were meeting their responsible lending and disclosure obligations, there were occasions where the micro lenders reviewed were not consistent in their approach to and/or record keeping for their obligations. Problems included instances of lenders not recording the actual purpose of the loan, undertaking very limited verification of a consumer’s financial circumstances, and not taking steps to clarify conflicting information in loan applications.