Australian Securities & Investments Commission issues interim stop order against City Finance Lending over small amount credit contract target market determination deficiencies

The Australian Securities & Investments Commission (ASIC) has made an interim stop order preventing City Finance Lending Pty Ltd from issuing its small amount credit contract (SACC) product to retail clients, citing deficiencies in the product’s target market determination under the design and distribution obligations (DDO) regime. ASIC’s concerns include that the target market may not be appropriately defined, including around what constitutes an acceptable source of income, which customers may be seeking credit for an unacceptable purpose, and which customers should be excluded due to lack of financial capacity to repay the principal, repayments and fees. It also flagged potential inconsistency between statements in the target market determination and statements on City Finance Lending’s website regarding minimum amounts borrowed, and said the distribution conditions may not adequately specify how the product will be limited to the target market, what information will be obtained and how it will be obtained and used, and what origination and approval controls are in place. The SACC product is described as allowing consumers to borrow up to AUD 2,000 for personal purposes. The interim stop order is valid for 21 days unless revoked earlier.