Nimble has proven themselves to be not-so-nimble when it comes to “smart little loans”. Being known for approving loans to customers at very high interest rates, they have been caught up in a controversy storm following an investigation by the Australian Securities and Investments Commission. After ASIC looked into their lending practices, they discovered that Nimble had failed in its duty of care to be responsible in approving loans for consumers.
It was found that Nimble ASIC had not been properly assessing the financial situation of their customers looking to take out payday loans. Instead, they had been using unreliable algorithms to determine a customer’s ability to take out loans that did not properly take into account customer’s financial information. Thus, they failed to “make proper inquiries of consumers’ requirements and objectives,” as instead they were “of a general nature and resulted in not enough information for Nimble to fully understand the consumer’s needs.”
Subsequently, Nimble “did not take sufficient or appropriate steps as required by law before providing a loan to the customer.” They “failed to consistently recognise” when consumers were making repeat loan applications within a short period of time.
As a consequence of Nimble’s inefficiency when assessing a consumer’s ability to take out payday loans, the company must pay more than 7,000 customers in excess of $1.5 million through a remediation program run by Deloitte. This refund cannot take more than 6 months to be completed.
ASIC also recommends customers affected by Nimble’s lending practice should contact Nimble first, and if they still remain unsatisfied with the outcome, should lodge a complaint with the Credit and Investments Ombudsman.
In addition, a $50,000 donation to Financial Counselling Australia must be made under Nimble’s name, as well as a review of its current business operations and engagement with the consumer credit regime, by an external compliance consultant.
Nimble chief executive, Sami Malia, spoke out following the investigation. He states that the company “regrets any inconvenience” caused to consumers and are working to rectify these concerns.
“Nimble has identified and promptly resolved these issues. They affected around 1.2 per cent of loans written during the period from 1 July 2013 to 22 July 2015”.
“These application assessment issues were entirely unintended and were resolved in collaboration with ASIC. There has been no adverse findings against Nimble”.
Mr Malia also comments “Nimble is always striving to have the best credit assessment systems and has made a significant investment in its application assessment processes that allow Nimble to continue making responsible lending decisions.”
ASIC’s investigation not only highlights Nimble’s lending practices, but it also brings attention to the need for stronger laws in regards to the payday lending industry.
ASIC Deputy Peter Kell, in a statement, said, “This outcome is a further example of ASIC’s strong focus on the payday lending sector. This remains a high priority area for ASIC, and we expect the industry to continue to lift its game.”
Gerard Brody, chief executive of the Consumer Action Law Centre, weighed in on the situation.
When asked about his thoughts on the Nimble investigation, he stated, “To be honest, I found it unsurprising.”
“The consumer sector has known for years there is a systemic problem in the payday lending industry and ASIC’s probe has confirmed our concerns that these lenders aren’t doing the required due diligence and ensuring people are able to repay loans.”
“While ASIC can take action and get people $1.5 million in refunds, that’s after the harm has occurred.
“It really underscores why we need stronger laws to protect customers.”
Mr Brody recommends an interest rate cap of 48 per cent on all consumer credit. This is in comparison to the current interest rate of small-amount loans under $2000 that can have annual interest rates of up to 400 per cent.
He believes, “In our experience with clients, people have a really ambivalent relationship with payday lenders.
“They’re often in a financially desperate situation and see this as the answer that’s going to give them some relief, but they quickly become aware that the relief is short-term and when the repayments roll around realise they’re being ripped off.”
This is why Consumer Action also calls for a stricter limit on how much a borrower’s income a payday lender can deduct to repay a loan; being capped at 5 per cent.
However, chief executive of the National Credit Providers Association peak body representing payday lenders, Phil Johns, disagrees with this sentiment.
He counteracts, “Nimble does not lend to anyone receiving benefits, so to draw conclusion that everyone using ‘payday loans’ is ‘financially desperate’ is misleading in this case and does not represent the vast majority, who use this product successfully.”
Mr John’s comments that payday loan interest rates should not be calculated annually as it is unfair for consumers whose loans do not run for a year minimum.
“The key word is ‘annual’ and does not become meaningful until a loan runs for one year, so for any loan that runs for less than a year it is misleading.”
Mr Johns also predicts that any payday lender company who is focused on short-term sales rather than compliance with consumer credit regime will “not be in business in five years’ time.
“It is clear under principles based legislation, lenders must take the most conservative view of the law, not necessarily the rule of law. A constant theme from ASIC is there must be individual assessment of a consumer’s situation.”
ASIC’s probe into Nimble’s lending practices is not the first time Nimble has been in the middle of a controversy. Prior to this investigation, Nimble had been criticised for its TV advertising which supported customers taking out payday loans for day-to-day living expenses as an alternative to taking advantage of any hardship programs offered by utility providers.