The Australian Securities & Investments Commission has published Report 805 (REP 805) warning that some lenders offering small amount credit contracts may be breaching consumer protection laws by moving financially vulnerable consumers into credit contracts with fewer protections following reforms under the Financial Service Reform Act 2022. The review points to potential shortcomings in compliance with both responsible lending and design and distribution obligations. ASIC said it is concerned some small and medium amount credit contract providers may be entering into unsuitable contracts and failing to identify and distribute products to an appropriate target market, including through business models that seek to avoid additional protections that apply to small amount credit contracts. The review drew on data collected from December 2022 to August 2024 and observed fewer small amount credit contracts, more medium amount credit contracts, and more missed repayments on medium amount credit contracts (alongside fewer missed repayments on small amount credit contracts). Recent enforcement activity highlighted includes civil penalty proceedings against Ausfinancial Pty Ltd (Swoosh Finance), AUD 16 million in penalties against Ferratum Australia Pty Ltd (in liquidation), and Federal Court action against Sunshine Loans Pty Ltd that is subject to appeal. ASIC said it will continue investigating business models designed to avoid consumer credit protections and will consider further enforcement action where it detects serious breaches in the small amount credit contract sector.

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