ASIC places interim stop order on credit for rent product

ASIC has issued an interim stop order on One Card Credit Pty Ltd’s (OCC) Scorebuilder and Safetynet loan product because of deficiencies in the target market determination (TMD).

ASIC was particularly concerned as the loan targets consumers looking to use credit to pay their rent. Consumers seeking to use credit to pay rent, a basic cost of living, are at a heightened risk of being financially vulnerable.

While the TMD explains that particular consumers are excluded from the loan, including consumers who cannot afford the minimum repayments without hardship, are financially vulnerable or are living in public housing, ASIC does not consider that the distribution conditions are sufficient to identify and exclude these consumers.

Further, ASIC considers that the TMD does not adequately describe the target market as it does not contain specific details about the financial situation or needs of the target market. ASIC’s concern was supported by missed repayment information showing that a significant proportion of consumers who had drawn down on the product had missed at least one repayment.

ASIC made the interim order to protect consumers from obtaining and using the loan that potentially may not be suitable for their financial objectives, situation, or needs. The interim order stops OCC from dealing in its loan. The order is valid for 21 days unless revoked earlier.

The design and distribution obligations (DDOs) require firms to design financial products that meet the needs of consumers, and to distribute those products in a more targeted manner. ASIC is concerned that OCC failed to appropriately identify a target market for their loan and put in place appropriate controls on its distribution.

ASIC expects OCC to consider the concerns raised about the TMD and take immediate steps to ensure compliance. ASIC will consider making a final order if its concerns are not addressed in a timely manner. OCC will have an opportunity to make submissions before a decision is made about a final stop order. The interim order stops OCC from dealing in its loan.

ASIC reminds financial product issuers that under the DDOs, they must define target markets for their products appropriately, having regard to the risks and features of their products. Issuers also need to consider how their product will reach the target market, and have appropriate distribution conditions in place to ensure the product is directed towards the target market.

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